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HMRC internal manual

Employment Income Manual

Deductions from general earnings: the benefits code: example of deduction from living accommodation charge

Section 364 ITEPA 2003

An engineer who lives in Manchester is required by her employer to work at a site inCornwall that is a temporary workplace. She works there for 3 months in 2003/04 and heremployer rents a house for her in St Ives for 4 months. For the last month she brings herhusband and family to St Ives for a holiday. The house rental is £1,200 per month.

There is an earnings charge on the employee under Section 102 ITEPA 2003 for the livingaccommodation provided by the employer, see EIM11301. Theamount of that charge is the rent paid by the employer, see EIM11431.A deduction is permitted from that charge by Section 364 ITEPA 2003 to the extent that adeduction would have been available if the accommodation had been paid for by the employeeout of her own earnings, see EIM31615.

For 3 months any travel costs are attributable to necessary attendance at a temporaryworkplace, see EIM32015. Travel costs include the cost of theaccommodation in that period, see EIM31815. The cost ofaccommodation in the last month is not deductible.

The net earnings for 2003/04 are computed as follows.

Cost of providing the accommodation 4 x £1,200 £4,800  
Less business use (3/4)   £3,600  
Net taxable earnings   £1,200