Living accommodation - work out the value to use

There is a standard reportable value that must be calculated for all properties. There is also an additional charge that must be calculated for properties that cost more than £75,000.

The standard reportable value

To work out the standard value, start with the greater of:

the 'annual value' of the accommodation – see the table below
any rent you pay for the accommodation

Note: you may have to add to the rent you pay for the accommodation a proportion of any premium payable under the lease. For technical guidance including worked examples see EIM11444 to EIM11449.

Country	Annual value to use
England and Wales	The 1973 gross rating value
Northern Ireland	The 1976 gross rating value
Scotland	The 1985 gross rating value divided by 2.7
Outside the UK	Annual rental value on the open market

You should then reduce the standard value proportionately if the accommodation is only provided for part of the year.

Next, you should deduct any rent that you receive from your employee for the accommodation.

Finally, you can reduce the reportable amount proportionately if the accommodation is:

shared by more than one of your employees
used partly for business

The additional charge for properties that cost more than £75,000

If the living accommodation you provide cost more than £75,000 then the amount to report is the sum of the standard reportable value and an amount known as the ‘additional charge’.

There are three basic steps in calculating the additional charge:

deduct £75,000 from the ‘cost of the accommodation’ – for an explanation, see the next section
multiply what's left by the official rate of interest and remember to make a proportionate reduction if the accommodation is provided for part of the year
then deduct any rent paid by your employee – excluding any that you’ve already deducted when working out the standard reportable value

After step 3 you can also reduce the additional charge proportionately if the accommodation is:

shared by more than one of your employees
used partly for business

Official rates of interest 2010-11 (PDF 47K)

Calculating the ‘cost of the accommodation’

When calculating the additional charge, there are two methods of working out the ‘cost of the accommodation’ needed in step 1.

If you held an interest in the property throughout the six years before it was occupied by your employee, and if they first occupied it after 30 March 1983, then you must use the following calculation:

the property’s value on the open market at the date the employee took up occupancy
plus any amounts you spent on improving it after the employee took up occupancy and before the start of the tax year
minus any reimbursement by the employee of these amounts
minus any amount paid by the employee to you for granting them a tenancy of the accommodation

In all other cases, you must use the following calculation:

the amount you purchased the property for
plus any amounts you spent on improving it before the start of the tax year
minus any reimbursement by the employee of these amounts
minus any amount paid by the employee to you for granting them a tenancy of the accommodation

Worked example

A company buys a property for £175,000 to provide living accommodation for one of its employees for a complete tax year. The gross rating value is £1,000 and the employee pays the company rent of £1,250. The official rate of interest for the year is 4 per cent.

The standard reportable value of the benefit is nil because the £1,250 rent paid by the employee is more than the annual value of £1,000. (This leaves £250 of rent that can be deducted when calculating the additional charge.)

The additional charge is £4,000, worked out as follows:

£175,000 - £75,000 = £100,000
£100,000 x 4% = £4,000
£4,000 - £250 (the rent not deducted to work out the standard value) = £3,750

The total value to report is therefore £3,750. This is the sum of the standard value (£0) and the additional charge (£3,750).