Particular benefits: heating, lighting, cleaning etc. expenses of job-related living accommodation: 10% limit: example of calculating the net amount of the earnings: employee makes good part of the expense of providing the benefits:
This page is only relevant for 2015/16 and earlier.
This example shows the interaction between:
- the 10 per cent restriction and
- the calculation to determine whether an employee is in lower-paid employment (see EIM20101).
The employee’s salary is £7,500 a year.
The employer paid a medical insurance premium of £450 in respect of the employee during the year.
The employee is entitled to a deduction of £200 for expenses within Section 336 ITEPA 2003 (see EIM31620 onwards).
The employer paid £1,250 during the year for heating and lighting of the job-related living accommodation, but the employee reimbursed the employer £325 of this expense. So the net cost to the employer was £925 (£1,250-£325).
The calculation to see whether the employee is in lower-paid employment (see EIM20101) is:
|Heating and lighting:||£|
|Salary plus medical benefit|
|deduction due under Section 336|
|10% of £7,750 =||775|
|less made good||325|
|£450 is less than the net cost of £925||450|
The total earnings before deducting the expenses of £200 are less than £8,500 so the employee is in lower-paid employment. So the medical premium and the heating and lighting are not chargeable as benefits. The amount of employment income is:
Note that when working out whether an employee is in lower-paid employment, the 10 per cent restriction of net earnings can limit the amount to be included as a benefit.
If the employee had not made good the £325 of the employer’s expenditure on heating and lighting he would not have been in lower-paid employment because the total emoluments would have been £8,725 (£8,400 + £325).
The amount of his employment income would have been:
|less deductible expenses||200|
|Heating and lighting:|
|10% of £7,750 = £775 which is less than the net cost of £1,250||775|