EIM11506 - Living accommodation: part of living accommodation used for business: example
Part 3 Chapter 5 ITEPA 2003
This page gives an example of a case where the premises are primarily designed as living accommodation but some rooms are being used exclusively for business purposes. There is the equivalent of a Section 336 ITEPA 2003 deduction from the provided living accommodation benefit (see EIM11503).
An employer purchased living accommodation for 拢300,000 in 2001. The living accommodation consists of ten main rooms. An employee is allowed to live in the living accommodation paying rent of 拢1,000 per annum. The employee is necessarily required to provide an office at home. The employee uses one room out of the ten in the living accommodation exclusively as this office. There is no exemption due from the provided living accommodation charge. The gross rating value for the whole premises is 拢1,500. The official rate of interest for 2002/03 was 5%.
The calculation of the amount of earnings for 2002/03 is:
| 听 | 拢 | 听 | 拢 |
|---|---|---|---|
| cost of providing living accommodation | 300,000 | 听 | 听 |
| less | 75,000 | 听 | 听 |
| additional yearly rent | 225,000 | at 5% | 11,250 |
| 听 | 听 | 听 | 听 |
| gross rating value | 1,500 | 听 | 听 |
| less rent paid by employee | 1,000 | 听 | 听 |
| Section 105 benefit | 500 | 听 | 500 |
| Total | 听 | 11,750 | 听 |
| less excess rent | 听 | nil | 听 |
| 听 | 听 | 11,750 | 听 |
| less one-tenth business use | (拢11,750 x 10%) | 1,175 | 听 |
| chargeable earnings | 听 | 10,575 | 听 |