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HMRC internal manual

Employment Income Manual

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

Section 107 ITEPA 2003This page shows how to calculate the cost of providing living accommodation in a market value basis case (see

EIM11477). 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 EIM11484.

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.
### ExampleA house that had been owned by the employer since 1972 was first occupied by a particular employee on 6 April 1998 when its market value was £130,000 (MV). It cost the employer £60,000 in 1972 and an extension was built in 1981 at a cost of £18,000.

As the total cost of the property exceeds £75,000, this employee first occupied it after 30 March 1983 and the employer had owned it for at least six years by 6 April 1998 (the date of this employee’s first occupation of it), the market value rule applies. The cost of providing the accommodation is the market value on 6 April 1998 of the employer’s freehold interest, that is £130,000.

If instead of first occupying the property on 6 April 1998, this employee had done so on 6 April 1982, the cost basis (see EIM11429) would apply because that date precedes 31 March 1983. The cost of providing the accommodation would then be the cost of the property in 1972, £60,000, plus the improvements of £18,000 in 1981, a total of £78,000.