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HMRC internal manual

Employment Income Manual

Living accommodation: Section 106 ITEPA 2003: amount of benefit where cost basis applies: example of taxable period

Section 106 ITEPA 2003

This page shows how to calculate the Section 106 ITEPA 2003 benefit of provided living accommodation in a cost basis case where the taxable period is less than a year (see EIM11428). For an example of how you calculate the cost of providing living accommodation in a cost basis case see example EIM11481.

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.


An employee is provided with living accommodation in the United Kingdom that was acquired by his employer for £135,000 in 1982. The employee has been provided with it since 1985 and so the cost basis applies. In 2002/03 the employee paid a rent of £900 per annum for it and for that year the official rate of interest (ORI) was 5%. The gross rating value £1,200. Although the employee moved out of the property on 5 December 2002 he continued to work for the employer. Someone else occupied the property after 5 December 2002.

The calculation of the amount of earnings for 2002/03 is:

  £   £
cost of providing accommodation 135,000    
less 75,000    
taxable period of 8/12 x 60,000      
(because he lived in the property for 8 of the 12 months) 40,000 at 5% 2,000
annual value: 8/12 of 1,200 800    
less rent: 8/12 of 900 600    
Section 105 benefit 200   200
less excess rent for taxable period     nil
Chargeable earnings     2,200

Although the employment is held for the year, as the accommodation is provided for 8 months of the year the taxable period is 8 months (see EIM11428).