HMRC internal manual

Employment Income Manual

EIM11348 - Living accommodation exemption: the customary test: judicial comments

Section 99(2) ITEPA 2003

The customary test (see EIM11347) has been considered by the Courts. In Vertigan v Brady (60TC624) it was held that although two-thirds of nursery foremen in the United Kingdom lived in provided living accommodation, that fact was not conclusive that a custom did exist. There were two other factors to take into account:
- how long the practice had existed and - whether it had achieved acceptance generally by the relevant employers.

It seems clear from this case that there is no custom where less than half of the employees in a particular kind of employment are provided with living accommodation, even if the practice is ancient. Note that it is the proportion of employees provided with living accommodation rather than other types of accommodation that is relevant. For example, in a particular kind of employment 25% of employees are provided with living accommodation, 60% are provided with board and lodging and 15% are not provided with any accommodation. Although 85% of employees are provided with accommodation of some kind the customary test would not be met as only 25% are provided with living accommodation.

Before exemption can be given the better performance test has to be satisfied (see EIM11349).