Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Employment Income Manual

HM Revenue & Customs
, see all updates

Living accommodation exemption: necessary for proper performance of the duties

Section 99(1) ITEPA 2003Part 3 Chapter 5 ITEPA 2003 does not apply to living accommodation provided for an employee if it is necessary for the proper performance of the duties that the employee should reside in the accommodation provided. This exemption from the benefit charge does not apply to most directors (see


The test is only satisfied where the employee can demonstrate that occupation of the particular property (as opposed to any other property) is essential to the proper performance of the duties of the employment.

Support for this view can be derived from Langley and Others v Appleby (53TC1), in which Fox J said at page 21
“if it is asserted that it is essential for the servant to occupy the house in order to perform his duties, it seems to me that the servant must establish affirmatively that for the performance of his duties he must live in that house and no other.”
The words “that house and no other” emphasise the strict nature of the test.

An employee may claim that it is necessary to occupy a particular residence because the employer requires the employee to live there. This is not enough to satisfy the test. It must be shown that the duties of the employment require occupation of the residence. An argument that the employee cannot afford to live elsewhere is not sufficient, see Vertigan v Brady (60TC624).

For types of employee accepted as being within the exemption see EIM11342.

For connected exemptions and tax relief see EIM11332. There can still be a charge on accommodation services such as heat and light (see EIM11521).