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How is living accommodation reported used partly for business purposes?
Monday, September 27th, 2010
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Situations where the employer can apportion the costs, and where the employee must claim tax relief…
The taxable value of the benefit of living accommodation can be restricted where a part of the property has genuine business use. There are two specific situations:
- a business property that has living accommodation attached, e.g. a flat above a shop, or living accommodation with a section that is designed specifically for business purposes
- a house in which one or more rooms are used for business purposes.
In the first situation, the cost or rent of the whole of the premises should be apportioned on a reasonable basis between the part used for business and the part using as living accommodation, e.g. in proportion to the floor area. HMRC accepts that the cost or rent for the business proportion will usually be more than that for the living accommodation proportion. The gross rating value for the property, used to determine the basic charge for the accommodation, may also have to split, although the living accommodation part may already have its own gross rating value.
In the second situation, the employer should calculate the basic charge and, if relevant, the additional charge, as if the property were provided entirely as living accommodation for the employee. The employee may then make a business deduction claim in respect of the proportion of the number of rooms or floor area used for business purposes.
Worked examples of these two procedures are provided by HMRC here.
Self Assessment Help Sheet HS202 allows employees to perform their own calculation of the basic and additional charges, and also provides the facility for the charges to be reduced in respect of business use in the second of the two situations explained above.
