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Q: How should the reportable value of living accommodation be apportioned when it is partly used for business purposes?
A: 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, for example 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 either 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 employer’ P11D Working Sheet 1 does not provide the facility to reduce the cash equivalent of the living accommodation where there is some business use of the property.
In the case of a business property with attached living accommodation, the employee may make a business deduction claim for the cost of providing the accommodation to be split on a reasonable basis, perhaps based on the floor area, or by comparing the rent that each part of the property might command.
In the case of a property which is principally living accommodation but has some rooms or areas used for business purposes, the employee may make a business deduction claim on the basis that the reportable cash equivalent for the whole property may be reduced in proportion to the number of rooms or floor area.
Help Sheet IR202 allows employees to perform their own calculation of the basic and additional charges, and also provides the facility for a claim for tax relief in respect of partial use of the accommodation for business use.
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