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|
|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|
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).