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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Living accommodation: cost of providing living accommodation

Section 104 ITEPA 2003

You need to know the cost of providing accommodation in order to decide which method to use to calculate the amount of the benefit (see EIM11428).

The cost of providing accommodation is A plus I minus P where:

  • A is the amount spent by a person involved in providing the living accommodation in acquiring it (in the case of a house etc this will be the cost of the freehold or leasehold interest)
  • I is the amount spent by a person involved in providing the living accommodation on improving it prior to the tax year
  • P is any amount the employee pays to the person involved in providing the accommodation:
    • to reimburse either A or I, or
    • for the grant of a tenancy.

For further information on the meaning of a person involved in providing the accommodation and what constitutes improvements see EIM11430. For an example see EIM11481.

In a case where the market value basis applies, the cost of providing living accommodation for the purposes of calculating the benefit is different (see EIM11477).