Income Tax (Earnings and Pensions) Act 2003 section 104

General rule for calculating cost of providing accommodation

Section 104 sets out the method for calculating the cost of providing living accommodation, which is used to determine whether the cost exceeds £75,000 for the purposes of the additional yearly value charge.

• The cost of providing accommodation is calculated using the formula A + I − P.
• A is the expenditure on acquiring the property, and I is the expenditure on improvements made before the relevant tax year, both incurred by a person involved in providing the accommodation.
• P is the amount the employee has paid back, either as reimbursement of acquisition or improvement costs, or as consideration for the grant of a tenancy or sub-tenancy.
• The resulting figure is used to determine whether the additional charge under section 105 applies, which comes into play when the cost exceeds £75,000.