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.

The basic charge

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.

Tips to obtain the Gross Annual Value

If it is proving difficult to establish the gross annual value of the property the following steps can be taken to obtain a figure:

  1. If the property was built pre 1989 the rateable value can be found on the water rates bill or from enquiries made to the local council’s rates office.
  2. If the property was built post 1989 there will not be a rateable value established nor a rateable value on the water rates (as all new properties have water meters!). Your only course of action is to use your best estimate of what the gross rateable value would be now e.g. use the council tax figure.
  3. Do get this figure agreed in writing with the local tax office. If the Inland Revenue are not happy with your estimate they will send out a District Valuer (at their expense) who will establish a figure for you. If you are unhappy with their decision you have the right to appeal.

The additional charge

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 2.5%).

Amounts made good

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.

Shared accommodation

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.

“Job-related” living accommodation

  1. It is necessary for the proper performance of the employee’s duties that he or she should reside in the accommodation (e.g. pub landlords, caretakers): or
  2. The accommodation is provided for the better performance of the employee’s duties and the employment is one of the kinds for which it is customary for employers to provide accommodation for the employee (e.g. clergymen, armed forces); or
  3. There is a special threat to the employee’s security, special security arrangements are in force and he employee resides in the accommodation as part of these arrangements (e.g. the Prime Minister or the Chancellor of the Exchequer)

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.

Other charges

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.