Living accommodation

Produced by Tolley in association with Philip Rutherford

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
  • Improvements
  • Rented properties
  • Methodologies ― cost above £75,000 or not
  • Cost of providing the property is £75,000 or less
  • Annual value
  • Lease premiums
  • More...

Living accommodation

Employers may provide living accommodation to their employees ‘by reason 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 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.

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 benefit will arise.

Living accommodation is 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.

As is generally the case with benefits, the benefit rules apply whether the accommodation is provided to the employee, or a member of their household or family. If the benefit is provided in the course of the employee’s domestic, family or personal relationships, no tax charge arises. The benefit provisions for living accommodation can also apply if the accommodation is provided as a ‘fair bargain’ ― in

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