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Section 105 ITEPA 2003

On 1 February 2000 an employer acquired living accommodation for £65,000 that an employee occupied from that date at a rent of £300 a year. The gross rating value for the property is £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 £900

less rent paid by employee £300

Total chargeable earnings £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 £3,000 a year from 1 February 2000, the amount of earnings for 2003 to 2004 would be:

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

less rent paid by employee £300

Total chargeable earnings £2,700

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