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Hi, I have a question re the expensive accommodation charge.
The question as per Kaplan F6 exam kit
“Jo is provided with non-job related accommodation by her employer, which the employer purchased 35 years ago at a cost of £72,000. The property has an annual value of £2,600, and had a market value of £245,000 when first made available to Jo 8 years ago. Jo pays £250 per month to her employer to live in the property”
What is the assessable benefit in 2014/15?
According to the answers, the assessable benefit is £nil as the original cost did not exceed £75,000. However surely the calculation should be based on the MV of £245,000 as the property was provided to the employee more than 6 years after purchasing it (27 years in this case).
Is the answer incorrect? Should it be £2600 – (12 x £250) + ((£245,000 – £75,000) * 3.25%) = £5,125
Many thanks in advance
If the original cost did not exceed 75,000 then the expensive accommodation charge will NOT apply. Therefore the the benefit is based on the annual value (2,600) less the rent paid by the employee (12 x 250 = 3000) = nil
Dear Tutor,
Please let me return to Anthony’s question.
In our lectures notes page 61 it is stated that:
” if the employer bought the accomodation more than six years before first provising it to the employee, the property’s market value when first occupied by the employee is used in the calculation of expensive accomodation benefit instead of purchase price.”Why should we use original cost here? Property was provided to the employee more than 6 years after purchasing.
Thank You in advance.
If you read note (iii) that precedes this note it says ” there is an additional benefit where the COST of providing the accommodation is greater than £75,000″
If the cost is not greater than £75,000, there is NO expensive accommodation benefit to compute so the market value when he moved in becomes irrelevant
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