The provision of living accommodation (other than ‘job-related accommodation’) to an employee represents a taxable benefit. If the cost of the accommodation is £75,000 or less, the benefit is the lower of:

  • annual value (gross rateable value); and
  • rent paid for it by the provider.

Less any amount paid by the employee. Where the cost of the accommodation is more than £75,000 there is an additional charge:

*(Cost – £75,000) X ‘official rate’.

E.g. an employee moves into a flat on 6 April 2011. The flat cost £400,000.

The benefit will be: (400,000 – 75,000) X 4% = £13,000 per year.

Lease premiums are apportioned to the relevant period on a pro-rata basis, calculated to the nearest day.

Note: if the employer has held an interest in the property for at least six years prior to the first provision to the employee, market value is substituted for ‘cost’ in the calculation.

The ‘official rate’ at the beginning of the year is the rate used; in 2011/12 it is 4%.

A company required a senior employee to move from Hertfordshire to London. It obtained a London flat for him at a rent of £500 per annum into which he moved, paying rent of £150 per annum. He was assessed on the £350 difference and appealed. The court upheld the assessment holding that the £350 was a taxable emolument. [McKie v Warner, Ch D 1961 50 TC 65].