General and background information

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: 

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. 

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. 


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 the 6th April (Currently 4.00%).

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

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
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 
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.

Information required

The cash equivalent of the accommodation provided.

Measure of benefit

Two components –a basic charge and an additional charge exist.

Basic Charge

The benefit is based on the greater of the gross rateable value of the property and the rent paid by the employer. The benefit is then reduced by any rent paid by the employee.

Additional charge

If the property (plus improvements measured from the next tax year after the expenditure is incurred) costs more than £75,000, there is an additional charge, unless the basic charge is already based on the open market rental value (ESC A91). If the employer has owned, or has had an interest in, the property for six years prior to the employee taking up occupancy, substitute market value for cost. Calculate the additional charge by taking cost or market value as appropriate and deduct £75,000 from that figure, then multiply by the official rate of interest at the beginning of the tax year (4% for 2012/13).

Note that all employees, not only those within the Form P11D net, are chargeable to tax on the benefit attributable to the provision of living accommodation. A report is required on Form P9D for those employees to whom the P11D does not apply. Ancillary benefits that are the employer’s liability are only chargeable to tax on Form P11D employees. Such benefits include running costs (e.g. repairs, heat and light) and the provision of company assets, such as furniture and appliances. Enter these in the brown box in section M if you, as employer, enter into a contract with the supplier, as they are subject to Class 1A NICs. If the expenses are personal to the employee, they are subject to both tax and Class 1 NICs and should be entered in the blue box in section M. P9D employees also pay tax and Class 1 NICs on personal bills settled by their employer.

Practical Points

  1. Employees may be exempt from a tax charge and the employer from a Class 1A NICs liability on the accommodation benefit if the accommodation is (see paragraph 21.2, Booklet 480):
    • a) necessary for the proper performance of the employee’s duties (e.g. farm workers or full time caretakers)
    • b) provided for the better performance of the employee’s duties and it is customary in this type of employment for employers to provide employees with accommodation (e.g. clergy and boarding school masters
    • c) provided as part of a special security arrangement as a result of a threat to the employee’s security.
    Certain directors cannot qualify for exemptions (a) or (b)(see paragraph 21.3, Booklet 480). Employers should not assume that an employee is exempt under these rules. Guidance should always be obtained from a professional adviser. If it is considered that an employee qualifies for one of these exemptions, the point should be stressed in the employment contract, an action which may help to defend marginal cases. 
  2. If the same accommodation is provided to more than one employee in the same period, the total benefit charged would not exceed the amount that would have arisen if the accommodation had been provided to a single employee.
  3. Employers should not charge a rent which exceeds the accommodation benefit charge and then assume that the balance may be set against any other benefits or expenses arising (see (4) below). Conversely, if the employee reimburses the employer for a specific expense, such as a gas bill, the amount paid cannot be deducted from the accommodation benefit. If he or she is a P9D employee and therefore not taxable on this type of ancillary benefit in any event, the employer should revise the arrangement to ensure that the employee is receiving maximum relief for any payment the employee makes.
  4. Assuming the employer holds the contract, the other benefits arising from the provision of accommodation are chargeable only on Form P11D employees. Running costs, such as gas, electricity, insurance and gardening will be taxable if met by the employer. The provision of furniture and appliances for the occupant’s use is also taxable as a benefit. The annual value of this benefit is calculated by taking 20% of the market value of the asset when it is first provided for any employee’s use (see section L below). If the exemption in (1) above applies, the charge on ancillary benefits is limited to the lower of the value of the benefits and 10% of the employee’s net emoluments, which is broadly the amount that suffers PAYE deductions in the payroll. 
  5. Be very careful in considering repairs, modernisation or alterations to the property. These may be construed as additional benefits chargeable on employees or taken into account when calculating the additional charge for property costing over £75,000.
  6. There are other points to note when considering the £75,000 limit. HMRC will not accept the cost being split between the occupiers, e.g. a £100,000 flat used by two directors cannot be divided into two £50,000 flats on the basis that the property is shared. Conversely the £75,000 limit applies to each property so that an employee with two company houses effectively gets a £150,000 limit. 
  7. If a property, such as a holiday villa, is freely available to an employee and family to use, HMRC will charge the employee irrespective of the amount of time it is actually used. However, in practice, it is usually possible to reach a compromise with HMRC and it may help if a clause is inserted in the employee’s contract to restrict availability to the employee’s expected actual use of the property. 
  8. HMRC may consider reducing the chargeable benefits if it can be demonstrated that the property is used for the purposes of the business, i.e.:
    • a) part of the accommodation is used for storage or as a showroom to which the employee has no access for private purposes
    • b) the accommodation is not available to the employee at all when being used for business; e.g. when it is used to accommodate clients or is available for commercial letting.
  9. If the property is used to accommodate visiting employees HMRC may accept that this is not taxable on the employee, just as the hotel cost would be considered allowable for tax purposes (see section M: ‘Travelling and subsistence payments’). For practical purposes, it is important to keep accommodation diaries or visitors books to produce to HMRC to provide evidence of the business use of the accommodation. 
  10. There is no tax charge on the provision for the employee, in premises occupied by the employer, of accommodation, supplies or other services used by the employee solely in performing the duties of his employment. This specifically excludes the provision of an office or stationery, for example, from a tax charge. Such items are not disclosed in Form P11D. 
  11. There is also no tax charge on the provision for the employee of home office facilities providing the employer requires the employee to work at home and any private use is not significant. Such items are not disclosed in Form P11D.

P11D Form: Section D 

P9D Form: Section C (Obsolete after 2015/16 Tax year)

P11D (Guide): Section D

Additional HMRC Documentation and external help

Click the links below to go directly to the HMRC website to download or view the PDF or help files listed below.

HMRC P11D Guide

HMRC P11D Working Sheet 1

HMRC Booklet 480 (Chapter 6) 

Manual data entry

Benefit and expenses records are assigned to an employee record within the system. The software will require a certain amount of information in order to calculate a benefit in kind value. The information required to be entered is particular to each section of the P11D.

How to manually enter a Section D benefit:

Select the employee record to that you wish to assign the benefit to


Select benefit section “Section D” from the drop-down benefit selector – or click on the “Section D” icon at the top of the screen.


Click the ADD button.


Enter the details of the accommodation & click SAVE to save the record


The following data points are used to calculate the benefit in kind for this benefit type:

Date accommodation was acquired by the employer 

Cost of the accommodation when first acquired

Cost of any improvements

Gross annual value of accommodation

Payments made by the employee towards the cost or grant of tenancy  

Dates of availability

Rent paid by the employer 

Rent paid by the employee

Having entered the necessary details of the benefit, click on SAVE to save the record.

The saved benefit record will be displayed

Modify Asset
Having clicked to EDIT the benefit, clicking the Modify Asset button will allow you to access and edit the properties of the "Asset"

Show Calculations
Having clicked to EDIT the benefit, clicking the Show calculations button will allow you to view the systems method of calculation used in deriving a BIK value.  

Importing Data

There is no import routine currently available for Section D benefits.