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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Living accommodation: Section 105 ITEPA 2003 benefit on property in the United Kingdom: example of taxable period

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. Although the employee moved out of the accommodation on 5 December 2003, he continued to work for the employer. The property was occupied by someone else after 5 December 2003. 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 8/12 x 900  
(because he lived in the property for 8 of the 12 months) 600
less rent paid by employee 8/12 x 300 200
chargeable earnings 400

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 8/12 x 3000  
(because the employee lived in the property for 8 of the 12 months) 2,000
less rent paid by employee 8/12 x 300 200
chargeable earnings 1,800

As the amount of rent paid is more than the property’s annual value, the rent paid by the provider is used in the calculation.

EIM11428 explains the period in which the benefit arises.

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