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Section 105 ITEPA 2003

On 1 February 2000 an employer acquired living accommodation for 拢65,000 that an employee occupied from that date at a rent of 拢300 a year. The gross rating value for the property is 拢900. No improvements were made to the property before 6 April 2003.

The calculation of the amount of earnings for 2003 to 2004 is:

Annual Value 拢900

less rent paid by employee 拢300

Total chargeable earnings 拢600

Note that from the 2017 to 2018 tax year any amount paid as rent must be paid by 6 July following the tax year of provision of the accommodation in order for it to be classed as a making good payment when calculating the taxable value.

If instead of acquiring the property the employer had rented it for 拢3,000 a year from 1 February 2000, the amount of earnings for 2003 to 2004 would be:

rent paid by employer 拢3,000 (Greater than its annual value)

less rent paid by employee 拢300

Total chargeable earnings 拢2,700

For examples of the section 105 charge on properties outside the United Kingdom see example EIM11421 and example EIM11422)