Living accommodation

Produced by Tolley in association with Philip Rutherford
Living accommodation

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Living accommodation
  • Living accommodation benefit
  • Calculating the benefit
  • Cost of the property
  • Cost of providing the property is £75,000 or less
  • Lease premiums
  • Cost of providing the property is more than £75,000
  • Market value
  • Calculating the benefit of living accommodation
  • Amount made good by the employee
  • More...

Employers may provide living accommodation to their employees by way of their employment. There is specific tax legislation that covers the provision of accommodation and the expenses associated with it.

In certain circumstances, a statutory exemption from tax is available for particular employments.

Living accommodation benefit

A tax liability on the provision of accommodation to an employee is imposed by ITEPA 2003, s 102. The section states that if accommodation is provided by way of his employment, for all or part of a tax year, then the cash equivalent of the benefit should be treated as earnings. The calculation of the cash equivalent is discussed below.

A liability can also arise under ITEPA 2003, s 62 as earnings where employers settle employee’s rents or provide special entitlements in relation to rent. This too is discussed below.

The term ‘provided’ should be given its everyday meaning; there are no specific legal definitions of it in relation to living accommodation.

The accommodation does not necessarily have to be provided by the employer. As long as the accommodation is provided by reason of the employee’s employment, even if it is provided by a third party, then a charge to tax will arise.

Living accommodation is also not defined, but it applies to houses, flats, houseboats, holiday villas and apartments. It should not be read to include non-living accommodation such as an office or garage.

Living accommodation should be differentiated from the provision of board and lodging, which is covered in the Lodging guidance note. Lodging is significantly more limited in its scope and refers to the provision of little more than somewhere to eat and sleep.

The charge to tax applies whether the accommodation is provided to the employee, or a member of their household or family, unless the accommodation is provided in the course of the employer’s domestic, family or personal relationships (in which case no tax charge arises). The benefit provisions for living accommodation can also apply if the accommodation is

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