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HMRC internal manual

Employment Income Manual

Living accommodation: Section 107 ITEPA 2003: meaning of market value

Section 107 ITEPA 2003

There are two definitions of the cost of providing living accommodation. These are:

  • for the purposes of deciding whether Section 105 or Section 106 ITEPA 2003 applies (see EIM11428) and
  • where the market value basis applies (see EIM11473).

This page tells you how to arrive at the cost of providing the living accommodation for the purposes of calculating the benefit where the market value basis applies.

For more information on whether the market value basis applies see EIM11473.

For the purposes of Section 106, the cost of providing the living accommodation where the market value basis applies is MV plus I minus P where:

  • MV is the market value of the interest in the accommodation held by any relevant person at the date of the employee’s first occupation of it
  • I is any expenditure incurred on improving it on or since that date until the day before the beginning of the tax year and
  • P is the amount the employee pays to the person involved in providing the accommodation:
    • in reimbursement of its initial cost or I, or
    • for the grant of a tenancy.

Market value means the price a property might reasonably be expected to fetch when sold with vacant possession on the open market. No reduction is made for any option over the property held by the employee, the person providing the accommodation or a person connected with any of them.

Whether a person is connected with another in this context is determined, via Section 718 ITEPA 2003, by Section 839 ICTA 1988 (see CG14580).

You do not have to worry about the meaning of market value in practice because for any case where you need to ascertain the market value of a particular property you consult the District Valuer (see EIM11478).