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HMRC internal manual

Employment Income Manual

Living accommodation exemption: homes outside the United Kingdom owned through a company: general background


Section 45 Finance Act 2008 introduced section 100A ITEPA 2003 which provides that Part 3 Chapter 5 ITEPA does not apply to living accommodation outside the UK provided by a company for a director or other officer of the company or a member of that person’s family or household.

The exemption was introduced to remove the tax charge that would otherwise arise where individuals use their own money to acquire a home outside the UK through a company. The decision to acquire a home outside the UK through a company is frequently influenced by the laws of the country in which the property is located rather than the possible UK tax consequences.

Individuals acquiring a home in this manner who direct the company’s affairs but who do not hold a formal appointment as director fall within Part 3 Chapter 5 ITEPA 2003 in the same way as if they did hold a formal appointment (see EIM11413).

The exemption only applies to the living accommodation benefit charge as applicable to company officers and others who direct the company’s affairs and members of their family or household. It has no effect on the other UK tax consequences that may result from the decision to acquire a home outside the UK through a company.

Main conditions

Section 100A includes conditions relating to ownership of the company and the company’s activities. Broadly, the effect of these conditions is to limit the exemption to circumstances where an individual uses their own money to provide funds to enable the company to acquire living accommodation outside the UK for their own or their family’s use. The company’s only activities are limited to those that are incidental to its ownership of the property. An example of an incidental activity is the letting out of the property when it is not occupied by the individual owner etc. This limitation on the company’s activities means that the exemption does not apply to individuals who are provided with the living accommodation as part of a remuneration package provided in return for performing duties of an employment.

Meaning of company

Company is defined in section 992 ITA 2007 as any body corporate or unincorporated association other than a partnership, a local authority or a local authority association. This wide definition is not restricted to companies registered in the UK and includes a number of entities formed under foreign law through which individuals may acquire homes outside the UK. Such entities will generally be classified as opaque for UK tax purposes. Examples include the ownership of a home in France through a “Societe Civile Immobiliere” (SCI) or in the United States through a Limited Liability Company(LLC).

Detailed guidance and example

EIM11372 describes the conditions in section 100A that have to be satisfied for the exemption to apply. EIM11373 explains the circumstances set out in section 100B which limit the application of section 100A. The example in EIM11374 describes a typical scenario to which the exemption applies.

Retrospective effect

Section 45(2) FA 2008 provides that sections 100A and 100B are to be treated as always having had effect. This means that where the exemption applies no liability to income tax in respect of the benefit of the accommodation arises for any tax year. An individual who has paid tax for any year charged in an assessment or included in a self-assessment in respect of living accommodation within section 100A is therefore entitled to request a repayment of that tax.