EIM21728 – Particular benefits: heating, lighting, cleaning etc. expenses of job-related living accommodation: 10% limit: example of calculating the net amount of the earnings: employee makes good part of the expense of providing the benefits: interaction with £8,500 a year threshold

This example shows the interaction between:

• the 10 per cent restriction and
• the calculation to determine whether an employee is in lower-paid employment (see EIM20101).

The employee's salary is £7,500 a year.

The employer paid a medical insurance premium of £450 in respect of the employee during the year.

The employee is entitled to a deduction of £200 for expenses within Section 336 ITEPA 2003 (see EIM31620 onwards).

The employer paid £1,250 during the year for heating and lighting of the job-related living accommodation, but the employee reimbursed the employer £325 of this expense. So the net cost to the employer was £925 (£1,250-£325).

The calculation to see whether the employee is in lower-paid employment (see EIM20101) is:

The total earnings before deducting the expenses of £200 are less than £8,500 so the employee is in lower-paid employment. So the medical premium and the heating and lighting are not chargeable as benefits. The amount of employment income is:

Note that when working out whether an employee is in lower-paid employment, the 10 per cent restriction of net earnings can limit the amount to be included as a benefit.

If the employee had not made good the £325 of the employer's expenditure on heating and lighting he would not have been in lower-paid employment because the total emoluments would have been £8,725 (£8,400 + £325).

The amount of his employment income would have been: