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HMRC internal manual

Employment Income Manual

Living accommodation: Section 106 ITEPA 2003: cost of providing living accommodation on cost basis: example

Section 104 ITEPA 2003

This page shows how to calculate the cost of providing living accommodation in a cost basis case (see EIM11429). For an example of how you use this figure to arrive at the amount of the Section 106 ITEPA 2003 living accommodation benefit see example EIM11483.

For information on whether there is a benefit under Section 105 or 106 see EIM11428.

For deciding whether the cost of providing living accommodation is on the cost basis or the market value basis see EIM11473.


On 1 January 2003 an employer bought a house for £125,000 for its employee to live in. Between January and March 2003 the kitchen was extended at a cost of £25,000 paid for by the employer. The employee first occupied the house on 6 June 2003, having reimbursed the employer £10,000 for the kitchen extension.

The cost of providing the living accommodation is:

cost of acquiring the freehold (A) plus 125,000
improvements to 5 April 2003 (I) 25,000
  = 150,000
less reimbursed by employee (P) 10,000
cost of providing the accommodation 140,000