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. »Ê¹ÚÌåÓýappre is the equivalent of a Section 336 ITEPA 2003 deduction from the provided living accommodation benefit (see EIM11503).
An employer purchased living accommodation for £300,000 in 2001. »Ê¹ÚÌåÓýapp living accommodation consists of ten main rooms. An employee is allowed to live in the living accommodation paying rent of £1,000 per annum. »Ê¹ÚÌåÓýapp employee is necessarily required to provide an office at home. »Ê¹ÚÌåÓýapp employee uses one room out of the ten in the living accommodation exclusively as this office. »Ê¹ÚÌåÓýappre is no exemption due from the provided living accommodation charge. »Ê¹ÚÌåÓýapp gross rating value for the whole premises is £1,500. »Ê¹ÚÌåÓýapp official rate of interest for 2002/03 was 5%.
»Ê¹ÚÌåÓýapp calculation of the amount of earnings for 2002/03 is:
| Ìý | £ | Ìý | £ |
|---|---|---|---|
| cost of providing living accommodation | 300,000 | Ìý | Ìý |
| less | 75,000 | Ìý | Ìý |
| additional yearly rent | 225,000 | at 5% | 11,250 |
| Ìý | Ìý | Ìý | Ìý |
| gross rating value | 1,500 | Ìý | Ìý |
| less rent paid by employee | 1,000 | Ìý | Ìý |
| Section 105 benefit | 500 | Ìý | 500 |
| Total | Ìý | 11,750 | Ìý |
| less excess rent | Ìý | nil | Ìý |
| Ìý | Ìý | 11,750 | Ìý |
| less one-tenth business use | (£11,750 x 10%) | 1,175 | Ìý |
| chargeable earnings | Ìý | 10,575 | Ìý |