10.2 Basis of valuation rules
The taxable value of a housing fringe benefit is measured by reference to the market value of the right to occupy the unit of accommodation reduced by any 'recipients rent' which in effect are rental payments.
Certain factors are disregarded in determining the market value of the right to occupy a unit of accommodation, namely:
- any rights of the occupant to have expenses associated with the occupancy (for example, electricity or gas) paid for by you (the employer) or someone else (where the right of occupancy carries with it the provision of gas or electricity without charge to the employee, the market rental value of the housing benefit would need to reflect that condition)
- any onerous conditions of the occupancy relating to the occupant's employment (for example, being on call for duty).
This means, in effect, that the right to occupy the unit of accommodation is valued according to what it would command for rent in an open market situation, without taking into account any special employment conditions or associated expenses of the occupant that might be paid by another person. The object is to ascertain the market rental value by reference to the occupied property, and to disregard any matters particular to the person or people who occupy it.
In normal valuation practice, the market rental is what a willing but not anxious person would be prepared to pay the owner to occupy the particular property in its existing condition if it were placed on the open market for rent. Ordinarily, market rental is ascertained by comparing it with similar properties, on the basis that the best evidence of the market rental value of a property is found by examining rents obtained for comparable properties in the locality.
A rental payment is the amount of rent or other consideration paid to the provider of the housing benefit in respect of the housing right. It is not restricted to rental money, but it must be something which is capable of being formally recognised within the lease or licence for the housing right. That is, it must be something for which a cash value can be determined. For example, a lease could specify that an employee will pay the costs of general maintenance of the property, and this would be considered a rental payment.