The following example is intended to describe a typical scenario to which the exemption applies.
In 2001, a UK resident school teacher and her partner decided to
buy a holiday home in France. They proposed to finance the purchase
of the property using a combination of a recent inheritance,
savings and a bank loan.
To avoid certain French laws on inheritance rights, they
were advised to buy the property through a Societe Civile
Immobiliere (SCI); a company constituted for the ownership and
management of property. Between them they own all of the shares in
the SCI although only one holds a formal appointment as a company
officer.
Each year they spend about eight weeks at the property and
let it for around three months. The company receives a small amount
of interest from a French bank account which it uses to fund
various property expenses.
The conditions as to ownership of the company are satisfied as
the SCI is wholly owned by a director or other officer of the
company and another individual. The company also satisfies the
conditions as to property ownership and activities. The interest in
the property is its main asset and its activities are clearly
incidental to its ownership of that interest. As none of the
exceptions in section 100B ITEPA apply, no liability to income tax
will arise under Part 3 Chapter 5 ITEPA in respect of the benefit
of the accommodation.
As Section 45(2) FA 2008 provides that the exemption is to
be treated as always having had effect, a living accommodation
benefit charge will not arise for any year. This applies to the
equivalent legislation that was in force before the enactment of
ITEPA so that, in this example, no charge to tax will arise in
respect of the benefit of the accommodation back to 2001.
