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HMRC internal manual

Capital Gains Manual

Capital payments - accommodation – to 5 April 2017

Rent-free accommodation or low rent accommodation is another commonly provided benefit. The value of the benefit is the market rental of the property for the period that it was available to the beneficiary. You should ask the Valuation Office Agency for advice on the level of the rental. The VOA entry in the HMRC library says how to contact them.

Long-term rental value

The benefit is provided over the period the property is available to the beneficiary not just the period they occupy it. If the property is available to the beneficiary without any prior booking the market rental value is the long term rental value. This will be lower than the weekly rental value multiplied by the number of weeks of ownership.

Occupier’s costs

If the trustees pay costs that are an occupier’s responsibility such as Council Tax and the utility bills those payments are chargeable to income tax. See TSEM 3788. The payments are not capital payments.

Retrospective payments of rent

In the same way that HMRC do not accept that a retrospective payment of interest in respect of an interest-free loan negates a capital payment we do not accept that retrospective payment of rent negates a capital payment.

Spouses and civil partners

If both spouses and partners are beneficiaries of the settlement the benefit may be split between them. If only one spouse or partner is a beneficiary the benefit is received by them alone.

Minor children

Minor children do not normally pay rent for property they occupy with their parents. But parents do normally pay rent they occupy with their minor children. Therefore there is no benefit to the child if the trustees provide rent-free accommodation for occupation by the family. The benefit is received by the parents or parent.


The beneficiary may be a co-owner of the property with the trustees as tenants-in-common. This gives the beneficiary rights of occupation as co-owner. But it is still possible for there to be a benefit because the beneficiary may be occupying a more expensive house than they could have provided with their own share. For example, a house worth £6 million is owned 90% by the trustees and 10% by the beneficiary. There is a significant difference between a house worth £5.4 million and a house worth £600,000. The amount of the benefit is the difference between:

  • the annual market rental value of the house provided, and
  • the annual market rental value of a house bought with the beneficiary’s own contribution.