EIM11485 - Living accommodation: Section 106 ITEPA 2003: amount of benefit where cost basis applies: example of taxable period
Section 106 ITEPA 2003
This page shows how to calculate the Section 106 ITEPA 2003
benefit of provided living accommodation in a cost basis case where
the taxable period is less than a year (see
EIM11428). For an example of how you
calculate the cost of providing living accommodation in a cost
basis case see example
EIM11481.
For information on whether there is a benefit under Section
105 or 106 see
EIM11428.
For deciding whether the cost of providing living
accommodation is on the cost basis or the market value basis see
EIM11473.
Example
An employee is provided with living accommodation in the United
Kingdom that was acquired by his employer for £135,000 in
1982. The employee has been provided with it since 1985 and so the
cost basis applies. In 2002/03 the employee paid a rent of
£900 per annum for it and for that year the official rate of
interest (ORI) was 5%. The gross rating value £1,200. Although
the employee moved out of the property on 5 December 2002 he
continued to work for the employer. Someone else occupied the
property after 5 December 2002.
The calculation of the amount of earnings for 2002/03 is:
|
£ |
£ |
||
| cost of providing accommodation |
135,000 | ||
| less |
75,000 | ||
|
60,000 | |||
| taxable period of 8/12 x
60,000
(because he lived in the property for 8 of the 12 months) |
40,000 |
at 5% |
2,000 |
| annual value: 8/12 of 1,200 |
800 | ||
| less rent: 8/12 of 900 |
600 | ||
| Section 105 benefit |
200 |
200 |
|
|
2,200 |
|||
| less excess rent for taxable period |
nil |
||
| Chargeable earnings |
2,200 |
Although the employment is held for the year, as the accommodation is provided for 8 months of the year the taxable period is 8 months (see EIM11428).
