There are two charges for living accommodation. These are the basic charge and the additional charge. Both of these can be disregarded if the employer pays a fair open market value rent for the provided accommodation in which case that figure can be used as the taxable value.
This applies to all properties and is the greater of the actual rent paid and the “gross annual value” of the property, and any amount attributed in respect of a lease premium, less any rent the employee pays.
The “gross annual value” is the value for rating which applied before the Community Charge was introduced. If the property did not have a gross rateable value, use your estimate of what the gross rateable value would have been if rates had continued. NB Different rules apply in Scotland.
If it is proving difficult to establish the gross annual value of the property the following steps can be taken to obtain a figure:
This applies to properties valued at more than £75,000 including the cost of any improvements. The charge is based on the excess over £75,000 multiplied by the official interest rate in force on on the 6th April (Currently 4.00%).
Any reimbursements to the employer by the employee go firstly towards reducing the basic charge and any excess is then carried over to reduce the additional charge.
Any accommodation that is shared should be apportioned equitably between the employees concerned.
Obviously certain occupations require the provision of living accommodation. No charge applies in cases of provided “job-related” accommodation.
Unfortunately directors are specifically excluded from the "job-related" exemption to the living accommodation charge unless they have no material interest (less than 5% of share capital) in the company and they are a full-time working director or the company is non-profit making or is a charity.
If as well as providing the accommodation, you paid some of the employee’s bills (such as heat & light) or provided ancillary benefits (such as furniture) show these in the appropriate other box or boxes on the P11D, whether or not the value of the accommodation itself is exempt.