EIM11506 - Living accommodation: part of living accommodation used for business: example

Part 3 Chapter 5 ITEPA 2003

This page gives an example of a case where the premises are primarily designed as living accommodation but some rooms are being used exclusively for business purposes. There is the equivalent of a Section 336 ITEPA 2003 deduction from the provided living accommodation benefit (see EIM11503).

An employer purchased living accommodation for £300,000 in 2001. The living accommodation consists of ten main rooms. An employee is allowed to live in the living accommodation paying rent of £1,000 per annum. The employee is necessarily required to provide an office at home. The employee uses one room out of the ten in the living accommodation exclusively as this office. There is no exemption due from the provided living accommodation charge. The gross rating value for the whole premises is £1,500. The official rate of interest for 2002/03 was 5%.

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

	£		£
cost of providing living accommodation	300,000
less	75,000
additional yearly rent	225,000	at 5%	11,250
gross rating value	1,500
less rent paid by employee	1,000
Section 105 benefit	500		500
Total		11,750
less excess rent		nil
		11,750
less one-tenth business use	(£11,750 x 10%)	1,175
chargeable earnings		10,575