The cost of the accommodation is replaced by market value where an interest was held in the accommodation, or the accommodation was owned, six years or more before it was occupied by the employee. The market value to use is the accommodation's value on the open market on the date it was first occupied by the employee.
This rule only applies if the cost of the property was more than £75,000.
Example 1
Property bought in 1990 for £50,000. £10,000 was spent on improving it between 1990 and 2001. It is worth £120,000 when it is provided to an employee in 2001.
As the property did not cost more than £75,000, there is no additional charge.
Example 2
Property bought in 1990 for £80,000. £10,000 was spent on improving the property between 1990 and 2001. It is worth £120,000 when it is provided to an employee in 2001.
The property cost more than £75,000 and it had been owned for six years or more when it was provided to the employee. So the market value of £120,000 is used to compute the additional charge and not the cost of £90,000 (original cost £80,000 plus improvements £10,000).
As the market value at 2001 is being used, any monies spent on improvements before 2001 are ignored.
There is an example showing how market value is used to calculate the value of the benefit at EIM11484.
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