Rent A Room consultation will hit Airbnb style letting

by Property 118

9:19 AM, 10th July 2018
About 3 months ago

Rent A Room consultation will hit Airbnb style letting

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Rent A Room consultation will hit Airbnb style letting

The Government consultation on Rent A Room tax reliefs looks set hit Airbnb style letting of entire properties rather than individual room lodger type agreements.

Click here to see the full consultation.

Executive Summary:

Rent a room relief allows individuals to earn up to £7,500 tax free from letting out furnished accommodation in their main or only residence. The original intention of the relief was to increase the quantity and variety of low-cost rented housing, giving more choice to tenants and making it easier for people to move around the country for work.

Since rent a room relief was first introduced in 1992, the PRS has more than doubled in size and the emergence of online platforms has made it easier than ever for those with spare accommodation to access a global network of potential occupants.

Against that backdrop, the government sought evidence against three objectives, which were to: find out more about the use of the relief; establish whether the relief is working as the government intends; and to help inform any potential reform of the relief.

Key conclusions from the call for evidence are that:

  • The government will retain rent a room relief at its current level of £7,500. Responses to the call for evidence indicated that in most cases, individuals would not be prepared to let out their spare rooms if the relief was not available. Given that, there was a consensus amongst respondents that rent a room relief provides an effective incentive for people to make their spare rooms available for rent. £7,500 exceeds by over £1,000 the average annual cost of renting a room in the UK. The limit was increased from £4,250 in April 2016, and the government will keep this under review
  • There is no evidence to suggest that tenancy length or tenancy type is anappropriate proxy for achieving the government’s objectives for rent a room relief. Most respondents suggested that individuals make decisions about what kind of tenancy to offer for a wide variety of reasons; the behaviour of those with spare rooms is highly specific to both their personal circumstances and the market they are operating in. Lodgers also value flexibility and benefit from a choice of different types of tenancies. There is no obvious rationale for the design of rent a room relief to favour one form of activity over another.
  • There is an opportunity to clarify the purpose of rent a room relief and ensure it is better targeted to achieve its original objective of incentivising the use of spare rooms. There was consensus amongst those who responded to the consultation that the purpose of rent a room relief is to support those with spare rooms to take in lodgers. The letting of whole properties was widely recognised as a different type of activity that should fall outside the scope of rent a room relief. However, the rules around what type of activity qualifies for rent a room relief are not currently clear on this point.
  • In response, the government plans to introduce a new shared occupancy test in rent a room relief. The new test will require the taxpayer to be living in the residence and physically present for at least some part of the letting period, for the income to qualify. This will ensure rent a room relief meets its original purpose of incentivising people to let spare rooms rather than whole properties, and will also clarify how rent a room relief interacts with the wider tax regime for property income. The government invites comments and submissions on the proposal for a new shared occupancy clause, before its introduction in Finance Bill 2018-19. The deadline for submissions is 31 August 2018.


Comments

Tobias Nightingale

14:56 PM, 11th July 2018
About 3 months ago

Reply to the comment left by Whiteskifreak Surrey at 11/07/2018 - 13:38The room sizes only apply to hmo's so a council house let to a family with 'grown up' kids/to be grown up kids could mean a grown up male would have a room smaller than said limit but cuz it is not a hmo it is legally allowed? But then I am not suprised as councils keep people in tempory accomidation/bnb longer than the law allows but no such legal action is taken.

The funny thing I find about the regs is they primarily involve hmos which are simply lettings to people unrelated. But there are no such safeguards to a fictious eg of say a family of 8 with 2 autistic kids and bad arthritis grandparents but no need to have emergancy lighting fire doors or electrical checks (at the moment) but we are to believe able bodied grown ups who are unrelated are more at risk.

Michael Barnes

0:31 AM, 12th July 2018
About 3 months ago

Reply to the comment left by Tobias Nightingale at 11/07/2018 - 14:56
but we are to believe able bodied grown ups who are unrelated are more at risk.

Yes, because related people will care for/about each other, whilst unrelated people are unlikely to.

Andrew

7:35 AM, 12th July 2018
About 3 months ago

Reply to the comment left by Michael Barnes at 12/07/2018 - 00:31
But a small room of 6.51 sqm’s Is still going to be the minimum, Irelivant if you care for somboby or not and if there are more than 5 + persons sharing these properties they should also be required to have two full bathrooms.
This sector shouldn’t be allowed to utilise a small room if the hmo sector cannot.

Tobias Nightingale

10:19 AM, 12th July 2018
About 3 months ago

Reply to the comment left by Michael Barnes at 12/07/2018 - 00:31
The regs surrounding HMO apply even if it is a joint tenancy(I think apart from the requirement to do a fire risk assessment if not the fire safety requirments). And if its a joint tenancy chances they are all on good terms.

James Barnes

11:39 AM, 12th July 2018
About 3 months ago

Reply to the comment left by Tobias Nightingale at 12/07/2018 - 10:19
Correct, the definition of a HMO is 3 or more people, who form 2 or more households, and who share facilities such as kitchens and/or bathrooms.
Whether the property is let on one tenancy agreement or by the room is irrelevant. It's amazing how many lettings agencies think otherwise.

J lied03

10:58 AM, 14th July 2018
About 3 months ago

What about self contained annexes that are attached/linked to the house with an internal door?? Built originally for relatives now empty and can provide good quality accommodation, but again too much hassle without tax relief.

Gary Hodge

13:28 PM, 14th July 2018
About 3 months ago

Reply to the comment left by J lied03 at 14/07/2018 - 10:58
Annexes will not be affected by the consultation but residency of the main part of the property will be required. It's the residency aspect that is being amended.
Annexes can create a common law tenancy instead of a licence, both of which qualify for the Rent A Room allowance.

Gary Hodge

16:25 PM, 14th July 2018
About 3 months ago

Reply to the comment left by Andrew at 10/07/2018 - 18:46
Resident landlords will be required to comply with the HMO regulations if they meet the HMO criteria, including the room size regulations. There are 2 notable differences:
Resident HMO landlords may have licencees, not tenants, and therefore not be required to issue ASTs.
I can't find any legislation that prohibits a resident HMO landlord from occupying a room smaller than 6.51m in order to retain their status as resident.

Michael Barnes

18:26 PM, 15th July 2018
About 3 months ago

Reply to the comment left by J lied03 at 14/07/2018 - 10:58
What about self contained annexes that are attached/linked to the house with an internal door??

What exactly are you asking here?

Without understanding what aspect of annexes you are asking about, I would have to say "they are the work of the Devil and should be exorcised, demolished, and the entire area sprinkled with Holy Water".

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