EIM11427 - Living accommodation: housing for key workers: shared ownership
Shared ownership
For information on the scheme for Key Housing and the Starter Homes Initiative, see EIM21735.
A tax liability may arise with shared ownership. If the employer owns part of the property then there is a benefit. If a third party, such as a RSL, owns part of the property and the property is provided by reason of the employment, then there is a benefit. (See EIM11408 for guidance on “by reason of the employment”.)
The amount of earnings is related to the share in the property, which the employee does not own.
Example 1
Sixty per cent of the property is owned by the key worker and 40% by a third party e.g. RSL or employer, the share in the property cost the employer, RSL etc less than £75,000, the GRV of the property is £1,200.
Answer
The amount of earnings under S105 is £480, 40% of the property’s GRV. [See EIM11431 for the calculation and EIM11432 which explains why GRV (gross rating value) is used.]
If the key worker pays rent of £480 or more per year then the benefit is extinguished.
If the share in the property cost the employer, RSL etc more than £75,000 the amount of the benefit is calculated in accordance with S106 ITEPA 2003.
Example 2
The facts are the same as above but the RSL spent £90,000 in buying a 40% interest in the property in May 2004.
Answer
(See EIM11480 for information on how to calculate the benefit.)
Cost of accommodation | £90,000 | - |
---|---|---|
less | £75,000 | - |
Additional yearly rent of | £15,000 × 5% = | £750 |
plus S105 benefit (GRV) (£1,200 × 40%) | - | £480 |
Total | - | £1,230 |
If the worker pays rent of £1,230 or more a year then the benefit is extinguished.