Income Tax (Earnings and Pensions) Act 2003 section 107

Special rule for calculating cost of providing accommodation

Section 107 provides a special rule for calculating the cost of providing living accommodation where the property has been held for at least six years before the employee first occupied it, substituting market value for original cost in the additional yearly rent calculation under section 106.

• This rule only applies where the cost of providing accommodation exceeds £75,000 and is used solely for calculating the additional yearly rent under section 106
• It applies when a person involved in providing the accommodation held an estate or interest in the property throughout the six years ending on the date the employee first occupied it
• The cost is calculated as: market value at the date of first occupation, plus improvements made since that date, minus qualifying payments made by the employee
• No reduction to market value is permitted for any option over the property held by the employee, a connected person, or a person involved in providing the accommodation