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HMRC internal manual

Employment Income Manual

Living accommodation: business use of accommodation

Part 3 Chapter 5 ITEPA 2003

Where the construction of the premises is primarily designed as living accommodation even though some rooms are being used exclusively for business purposes there is the possibility of a deduction, equivalent to a deduction under Part 5 Chapters 2 or 5 ITEPA 2003, from the provided living accommodation benefit. An example would be an ordinary house in which one room was used exclusively as an office.

The legislation giving this deduction is Section 364 ITEPA 2003. The test is whether if the employee had paid for the living accommodation there would have been an entitlement to a deduction under Part 5 Chapters 2 or 5. One example is where part of the accommodation may itself be a workplace so that a deduction under Section 336 ITEPA 2003 could be given (see EIM32760). If there would have been a deduction then a similar deduction can be given from the provided living accommodation benefit.

The deduction is made from the amount of the cash equivalent of the living accommodation benefit. Take the example of an employee who uses one room, out of a total of ten in thehouse, exclusively for the duties of his employment. You would calculate the amount of living accommodation benefit and reduce the total by one-tenth (see example EIM11506).

Where a separate part of the premises is clearly designed and used for business purposes do not give a deduction but see EIM11502 instead.

Where the accommodation is necessary for attendance at a temporary workplace and Section 338 ITEPA 2003 applies there may be a deduction from the accommodation benefit charge (see EIM31816 and EIM32075). This is not dependant on business use of the accommodation and will usually be equal to the benefit charge (see EIM31836).