In December last year, the Government published a call for evidence to find out how rent-a-room relief was being used. The purpose of the call for evidence was to find out whether the relief was being used as intended – to increase the availability of low-cost private residential accommodation – or whether it was being abused, and, if so, to inform any reforms.
In light of the responses received in relation to the call for evidence, the Government have confirmed that they will keep rent-a-room relief at its current level of £7,500. However, in recognition of the fact that the relief is targeted at those letting a spare room in the taxpayer’s own home, rather than at those letting whole properties (which is a different kind of let), a new shared occupancy test is to be introduced. This must be met for rent-a-room relief to be forthcoming. The necessary legislation to introduce this test has been published in draft.
The new test will require that the taxpayer must be living in the residence and physically present for at least some of the residence period for the relief to be available. However, as currently worded, there is no minimum overlap period; the draft legislation requires only that the use by the lodger ‘overlaps in time (wholly or partly)’ with the use by the taxpayer and/or his or her family with the use of the residence as sleeping accommodation.
Comments are invited on the proposed new clause by 31 August 2018. The intention is that the new test will apply from the 2019/20 tax year.
Where rent-a-room relief is not available, the taxpayer may be able to take advantage of the £1,000 exemption for rental income.
Written by the Tax Advice Network