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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Living accommodation exemption: homes outside the United Kingdom owned through a company: example

The following example is intended to describe a typical scenario to which the exemption applies.

ScenarioIn 2001, a UK resident school teacher and her partner decided to buy a holiday home in France. They proposed to finance the purchase of the property using a combination of a recent inheritance, savings and a bank loan.

To avoid certain French laws on inheritance rights, they were advised to buy the property through a Societe Civile Immobiliere (SCI); a company constituted for the ownership and management of property. Between them they own all of the shares in the SCI although only one holds a formal appointment as a company officer.

Each year they spend about eight weeks at the property and let it for around three months. The company receives a small amount of interest from a French bank account which it uses to fund various property expenses.

ExemptionThe conditions as to ownership of the company are satisfied as the SCI is wholly owned by a director or other officer of the company and another individual. The company also satisfies the conditions as to property ownership and activities. The interest in the property is its main asset and its activities are clearly incidental to its ownership of that interest. As none of the exceptions in section 100B ITEPA apply, no liability to income tax will arise under Part 3 Chapter 5 ITEPA in respect of the benefit of the accommodation.

As Section 45(2) FA 2008 provides that the exemption is to be treated as always having had effect, a living accommodation benefit charge will not arise for any year. This applies to the equivalent legislation that was in force before the enactment of ITEPA so that, in this example, no charge to tax will arise in respect of the benefit of the accommodation back to 2001.