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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Living accommodation exemption: homes outside the United Kingdom owned through a company: specific conditions in section 100A ITEPA 2003

Certain conditions have to be satisfied if 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 is to qualify for exemption from the benefit charge on provided living accommodation. These conditions are set out in section 100A and are described below.

Company ownership

In order for the exemption to apply, section 100A provides that the company:
 

  • must be wholly owned by the director or other officer of the company or by that person and other individuals with no interest in the company being partnership property and
  • must have been the holding company of the property at all times after the relevant time

The requirement that the company must be wholly owned by individuals means that the exemption will not apply where the holding company of the property is owned via a trust. This does not apply to a bare trust or nominee arrangement. Bare trusts are treated for tax purposes as if the beneficiary holds the trust property in his or her own name. It follows that beneficial ownership of a company through a bare trust does not automatically prevent the exemption from applying.

Property ownership and company activities

To qualify as “the holding company of the property”:
 

  • the company must have an interest in the property under the law of any territory that confers a right to exclusive occupation of the property at all times or at certain times (“a relevant interest in the property”)
  • its interest in the property must be its main or only asset
  • its only activities are those that are incidental to its ownership of that interest

The right to exclusive occupation at certain times covers time-share arrangements.

Letting the property is regarded as an incidental activity as are organising and paying for cleaning, garden maintenance etc. Incidental activities also include building a property ‘from the ground up’ where the company acquires the land and then receives and pays out money over a period of time in order to finance instalments paid to a local builder who constructs the property.

Holding companies

A company will also qualify as the holding company of the property where it wholly owns a subsidiary company which meets the above conditions, the holding company’s main or only asset is its interest in that subsidiary and its only activities are incidental to its ownership of that interest.

Meaning of the relevant time

The relevant time will usually be the time when the company first owned a relevant interest in the property. However, where the individual first acquired an interest in the company from an unconnected person at a time when the company already owned a relevant interest in the property, the relevant time will be the time when the individual first acquired the interest in the company.

Exceptions from section 100A

Section 100B ITEPA provides for exceptions from section 100A. If any of the section 100B exceptions apply, the exemption will not apply and the cash equivalent of the benefit of the accommodation will need to be returned in accordance with the rules in Part 3 Chapter 5 ITEPA. See EIM11373 for guidance on section 100B.