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Income Tax (Earnings and Pensions) Act 2003

Section 315: Limited exemption for expenses connected with certain living accommodation

1325.This section limits the amount charged to tax in respect of certain expenditure (or reimbursement of expenditure by the employee) in connection with living accommodation. It derives from section 163 of ICTA. It applies to all employees whether in excluded employment or not whereas section 163 applies only to those employments within Chapter 2 of Part 5 of ICTA. This is a minor change in the law. See Change 76 in Annex 1.

1326.Subsections (2) and (3) set out the conditions which must be satisfied for the exemption to apply.

1327.Subsection (4) provides a formula to calculate the amount to which the exemption is applied. The following example shows how the formula works, using NE, DA, DE and SMG as defined in the section.

1328.Assume an employee’s earnings are £10,000 a year (and there are no deductions) and no sums made good. The formula works to give the right pro-rata result for each of the following circumstances:

  • Employment held and accommodation provided for whole year

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