Job-related accommodation

(Sections 99(1)(2), 100, 101 ITEPA 2003)

Job-related accommodation’ is not chargeable as a benefit if it meets the following requirements:

  • it is provided for the better performance of the duties of the employment, and
  • the employment is one of the kinds in which it is customary for employees to provide living accommodation for employees (subject to the exception for an employee who is also a director, unless he has no material interest in the company and either he is a full-time working director or the company is a non-profit-making company or is established for charitable purposes only)
  • living accommodation provided as a result of a security threat if:

(a) there is a special threat to the security of the employee

(b) special security arrangements are in force, and

(c) the employee resides in the accommodation as part of those arrangements.

Two soldiers were allotted civilian billets in lieu of barracks accommodation and were paid lodging allowances. They were assessed on the allowances and appealed. The court upheld the assessments and refused a deduction for the actual cost of their lodgings. [Nagley v Spilsbury; Evans v Richardson, Ch D 1957, 37 TC 178]. 

The House of Lords held that a ‘shadow director’ was liable to tax on benefits including free living accommodation. The House held that ‘accommodation and benefits in kind received by a shadow director should be taxed in the same way as those received by a director’. [R v Allen, HL 2001, 74 TC 263 2001]. Note: the property in question was not in the UK, but the case precedes the legislation below and was in line with the law at the time.

Homes owned outside the uk through a company

(sections 100, 100A, 100B ITEPA 2003).

There is no benefit charge in respect of living accommodation outside the UK provided by the company for a director or other officer of the company or a member of the director’s family and household if:

  • the company is wholly owned by the director and other individuals and no partnership is involved, and
  • the company has been the holding company of the property at all times when it owns a right to exclusive possession of the company and that is its only or main asset and its only activities are those incidental to its ownership  of the property.

Use of an asset owned by the employer 

(sections 205, 207, 208 ITEPA 2003)

Where an employee has the use of an asset which the employer owns (excluding cars, vans and mobile phones), a benefit arises. The amount of the benefit is the greater of 20% of the market value of the asset when first provided to the employee and any actual payments paid by the employer.

An exception to this occurred in the case of Pepper v Hart HL 1992, 65 TC 421. Nine schoolmasters and the bursar of a public school had their sons educated there at a reduced fee. The boys occupied surplus places and their education was at the discretion of the school. The costs charged to the employees represented the direct costs of the boys’ education, but did not include any indirect costs. They were assessed on a proportion of the total costs and appealed, claiming that only the direct costs should be charged. The House of Lords unanimously upheld the appeal.