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HMRC internal manual

Employment Income Manual

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Living accommodation: Section 107 ITEPA 2003: cost basis or market value basis

Section 107 ITEPA 2003

When you have decided that the property cost more than £75,000 and that the cash equivalent of the benefit is to be calculated under section 106 ITEPA 2003 (see EIM11472) you then have to decide whether the cost basis or the market value basis will be used to calculate the benefit.

The cost basis will apply in most cases. It applies in all cases where the market value basis does not apply. This page tells you when the market value basis applies. For a flowchart telling you which basis applies see flowchart EIM11474a.

The market value basis applies where:

  • the cost of the accommodation at 6 April in the tax year under consideration (see EIM11429) exceeds £75,000 and
  • the employee first occupied the accommodation after 30 March 1983 and
  • throughout the six years up to the date the employee first occupied it an interest in it had been held by:
    • the employer, or
    • the person providing it, or
    • a person (other than the employee) connected with either of them.

For this purpose it does not matter whether it was the same interest or person throughout the six years. Whether a person is connected with another in this context is determined by Section 839 ICTA 1988 via Section 718 ITEPA 2003 (see CG14580 onwards).

For details of what is market value see EIM11477.

For details of what is cost see EIM11429.