Income Tax (Earnings and Pensions) Act 2003 section 110

Meaning of "annual value"

Section 110 defines how the "annual value" of employer-provided living accommodation is calculated for the purposes of the employment income tax charge.

• The annual value is the rent that could reasonably be expected on a year-to-year letting, assuming the tenant pays all taxes, rates and charges and the landlord bears repair, insurance and maintenance costs.
• Where the only comparable lettings include services at an inclusive rent, the landlord's cost of providing those services is deducted to arrive at a notional unfurnished, non-serviced rent — but any profit element in the service charges is treated as rent.
• Where comparable lettings involve separate charges for services on top of rent, those charges are added back: in full for repair, insurance or maintenance of the landlord's other premises, and net of cost for all other (relevant) services.
• In practice, HMRC normally use the property's gross rateable value as a proxy for annual value; this calculation is mainly needed where no gross rateable value is available.