Part 3Employment income: earnings and benefits etc. treated as earnings

Chapter 5Taxable benefits: living accommodation

Accommodation costing more than £75,000

107Special rule for calculating cost of providing accommodation

1

This section contains a special rule for calculating the cost of providing living accommodation which—

a

operates for the purposes of step 2 of section 106(2) (calculating the additional yearly rent), and

b

accordingly only operates where the cost of provision for the purposes of section 106(1) (as calculated under section 104) exceeds £75,000.

2

This section applies if, throughout the period of 6 years ending with the date when the employee first occupied the accommodation (“the initial date”), an estate or interest in the property was held by a person involved in providing the accommodation.

It does not matter whether it was the same estate, interest or person throughout.

3

For any tax year the cost of providing the living accommodation for the purposes mentioned in subsection (1)(a) is given by the formula—

MV+I-Pmath

where—

MV is the price which the property might reasonably be expected to have fetched on a sale in the open market with vacant possession as at the initial date,

I is any expenditure incurred on improvements to the property which has been incurred during the period—

  • (a) beginning with the initial date, and

  • (b) ending with the day before the beginning of the tax year,

by a person involved in providing the accommodation, and

P is so much of any payment or payments made by the employee to a person involved in providing the accommodation as represents—

  • (a) reimbursement (up to an amount not exceeding MV) of any expenditure incurred in acquiring the estate or interest in the property held on the initial date,

  • (b) reimbursement of I, or

  • (c) consideration for the grant to the employee of a tenancy or sub-tenancy of the property.

4

In estimating MV no reduction is to be made for an option in respect of the property held by—

a

the employee,

b

a person connected with the employee, or

c

a person involved in providing the accommodation.