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HMRC internal manual

Employment Income Manual

Living accommodation: meaning of provided: example 2

Sections 97 and 108 ITEPA 2003 and Extra-Statutory Concession A91

The meaning of provided can cause difficulties, often in the case of holiday accommodation (see EIM11405). This page, example EIM11421 and example EIM11423 use examples with similar basic facts to bring out the different meaning provided can have depending on the facts of the case.

A UK company purchases a flat in a French ski resort for £200,000. It is agreed that a market rental for the property would be £500 per week during the 6 month skiing season and £100 per week during the rest of the year. A husband and wife who are both directors of the company use the flat for holidays with their children for 3 weeks during the ski season and one week in the rest of the year. Their children are neither employees nor directors of the company. The company bought the property to let as a commercial letting business. They have employed professional agents to let the property and have managed to let the property for 12 weeks of the year in addition to the period it was used by the husband and wife directors.

In this case we would accept that provided is equivalent to actual use.

If the cost of the accommodation exceeds £75,000, then the amount of the cash equivalent would be calculated in accordance with Section 106 ITEPA 2003 (see EIM11472). As the annual value is based on the open market rental, under ESC A91 the cash equivalent of the benefit is restricted to step 1 of Section 106. This would mean that the cash equivalent for the tax year would be £1,200 (£15,600 x 4/52). Under Section 108 ITEPA 2003 that would be split between the husband and wife in whatever way was just and reasonable, presumably half each in this case (see EIM11472).

You may ask why the Section 105 ITEPA 2003 charge is not £1,600 (being 3 weeks at £500 in the skiing season and 1 week at £100 outside the season). The answer is that the wording of Section 105(3) requires us to look at a proportion of the annual rent rather than the rent for the actual weeks it was used.