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HMRC internal manual

Employment Income Manual

Living accommodation: avoidance areas

Section 67(1) ITEPA 2003

The following list is of cases in which you may face argument that there is no provided living accommodation charge.

  • Shadow director cases. In these cases the individual is neither an employee nor an actual director of the company that provides the individual with the use of living accommodation. It is still possible that a benefit arises under Part 3 Chapter 5 ITEPA 2003 on the individual if the individual is the one who pulls the strings of the company (see EIM11413).
  • Co-ownership cases. In these cases the employee and employer co-own the living accommodation, usually as tenants in common through a trust (see EIM11414).
  • Lease premium cases. These are cases where a large premium and small rent is paid by the employer to a third party for a short lease on living accommodation (see EIM11415). Section 71 FA 2009 introduced special rules to stop attempts to enter into such arrangements to avoid tax. The special rules apply to a premium payable under a lease entered into on or after 22 April 2009 or on the extension of the term of an existing lease on or after that date.
    This legislation ensures that where a lease premium is paid for a lease with a term of 10 years or less, the same tax treatment will follow as if the lease premium were rent paid and spread over the duration of the lease. The legislation also applies to a lease premium paid for a lease with a term exceeding 10 years where the lease contains a provision that gives a person the right to terminate it which is capable of being exercised in such a way that the term of the original lease is 10 years or less. See EIM11444 for an overview of the rules.