Part 3

Employment income: earnings and benefits etc. treated as earnings
Chapter 5

Taxable benefits: living accommodation

Accommodation costing more than £75,000

Special rule for calculating cost of providing accommodation
107
1
This section contains a special rule for calculating the cost of providing living accommodation which—
a
operates for the purposes of step 2 of section 106(2) (calculating the additional yearly rent), and
b
accordingly only operates where the cost of provision for the purposes of section 106(1) (as calculated under section 104) exceeds £75,000.
2
This section applies if, throughout the period of 6 years ending with the date when the employee first occupied the accommodation (“the initial date”), an estate or interest in the property was held by a person involved in providing the accommodation.
It does not matter whether it was the same estate, interest or person throughout.
3
For any tax year the cost of providing the living accommodation for the purposes mentioned in subsection (1)(a) is given by the formula—
MV + I - P
where—
MV is the price which the property might reasonably be expected to have fetched on a sale in the open market with vacant possession as at the initial date,
I is any expenditure incurred on improvements to the property which has been incurred during the period—
- (a) beginning with the initial date, and
- (b) ending with the day before the beginning of the tax year,
by a person involved in providing the accommodation, and
P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents—
- (a) reimbursement (up to an amount not exceeding MV) of any expenditure incurred in acquiring the estate or interest in the property held on the initial date,
- (b) reimbursement of I, or
- (c) consideration for the grant to the employee of a tenancy or sub-tenancy of the property.
4
In estimating MV no reduction is to be made for an option in respect of the property held by—
a
the employee,
b
a person connected with the employee, or
c
a person involved in providing the accommodation.