Income Tax (Earnings and Pensions) Act 2003 section 109

Priority of this Chapter over Chapter 1 of this Part

Section 109 establishes the priority rules for taxing living accommodation benefits where a charge could arise under both the living accommodation rules (Chapter 5) and the general earnings rules (Chapter 1).

• Where living accommodation gives rise to a potential tax charge under both the living accommodation chapter and the general earnings chapter, the living accommodation chapter takes priority.
• The full cash equivalent calculated under the living accommodation rules is treated as taxable earnings for the relevant tax year.
• Any amount that would otherwise be taxable as general earnings under Chapter 1 is only chargeable to the extent it exceeds the cash equivalent already taxed under the living accommodation chapter.
• If the cash equivalent under the living accommodation chapter is nil, the priority rule does not apply, and the full amount is instead taxed as general earnings under Chapter 1.