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HMRC internal manual

Employment Income Manual

Living accommodation: Section 105 ITEPA 2003 benefit on property in the United Kingdom: example

Section 105 ITEPA 2003

On 1 February 2000 an employer acquired living accommodation for £65,000 that an employee occupied from that date at a rent of £300 a year. The gross rating value for the property is £900. No improvements were made to the property before 6 April 2003.

The calculation of the amount of earnings for 2003/04 is:

annual value 900
less rent paid by employee 300
Total chargeable earnings 600

Note that from the 2017/18 tax year any amount paid as rent must be paid by 6 July following the tax year of provision of the accommodation in order for it to be classed as a making good payment when calculating the taxable value.

If instead of acquiring the property the employer had rented it for £3,000 a year from1 February 2000, the amount of earnings for 2003/04 would be:

rent paid by employer 3,000 (Greater than its annual value)
less rent paid by employee 300  
chargeable earnings 2,700  

For examples of the Section 105 charge on properties outside the United Kingdom see example EIM11421 and example EIM11422).