Shared occupancy test for rent-a-room relief adds unnecessary complexity

Shared occupancy test for rent-a-room relief adds unnecessary complexity

15:05 PM, 31st July 2018, About 4 years ago 9

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The government has agreed to retain rent a room relief at its current level of £7,500 per annum. However, it has also proposed a new “shared occupancy test” in order for those renting their spare rooms to continue to qualify for the relief. AAT (Association of Accounting Technicians) believes that the new test will add unnecessary complexity to the tax system and has other shortfalls, particularly around how shared occupancy can be proved.

The shared occupancy test will effectively bring an end to rent-a-room relief for those renting their whole properties out or who rent out a single room whilst they are away. These “landlords” will have to rely on the much lower £1,000 property allowance instead.

Phil Hall, AAT Head of Public Affairs & Public Policy, says:

“This will add unnecessary complexity to the tax system. Many will be forced to complete a self-assessment tax return when they otherwise wouldn’t and many more will be required to laboriously keep records of when they were and weren’t at home.

 “It’s also likely to reduce accommodation availability and choice because many “landlords” will simply choose not to rent out their spare rooms when they are not present.

 Rent-a-room relief is one of the few ways in which people can supplement their annual earnings in a relatively simple and tax efficient manner but this new test will change that. ”

 Although the legislation is due to come into force shortly (April 2019) it remains unclear as to whether or not HMRC will require taxpayers to prove their shared occupancy or if they are simply relying on taxpayers honesty.

Phil Hall added;

“If no proof is required then the scheme will be open to widespread abuse. If proof is required, it’s difficult to see exactly how shared occupancy can be proven in practice, especially when this may relate to irregular nights here and there. Enforcement will be a nightmare and I’m not sure HMRC have properly thought that through.

“A shared occupancy test is a headache being created for what the Treasury’s own analysis states will be a “negligible” impact on tax receipts.

“The best solution for landlords, tenants, policymakers and the economy would be to drop these plans and allow rent-a-room relief to continue as it has for over 25 years as a simple to administer, easy to understand tax relief that’s available to all.”


Neil Patterson

15:10 PM, 31st July 2018, About 4 years ago

This is part of the Crack Down on Airbnb which could ultimately be good for Landlords at risk from Subletting.

Previous Article: 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.

Mark Alexander - Founder of Property118

15:26 PM, 31st July 2018, About 4 years ago

What about when live in landlords go on holiday though? What if they only spend a night with friends or relatives? Will all these live in landlords now complete tax returns just because they spent a night away from home?

This hasn’t been thought through properly has it?

Chris mccauley

10:05 AM, 1st August 2018, About 4 years ago

Big Brother will be watching you.

Barbara Gwyer

10:17 AM, 1st August 2018, About 4 years ago

Surely if the landlord is living in the property as their sole main residence that should be all the proof the Government requires? But of course nothing with this current Government can be so simple can it?

Whiteskifreak Surrey

10:56 AM, 1st August 2018, About 4 years ago

Reply to the comment left by Mark Alexander at 31/07/2018 - 15:26
I thought that it will be a minimum time the landlord spends in his property, like maybe 9 months out of 12, or similar. We have had a lodger in our sole residence in the last 12 years , and the present one has been with us nearly 5 years. So - from now on - when we go on holidays, are we supposed to chuck him out? What about overseas business trips? Family occasions with an odd overnight stays? I think this is sooo ridiculous that even this STUPID government cannot make it up (although I am not holding my breath). Even if one applies for a residency in this country the maximum stay out is - I think - 90 days per year. That sort of principle would be understandable, if they want to assure that people indeed rent their spare room out, rather than whole properties and Airbnb basis. Any opinions?


12:01 PM, 1st August 2018, About 4 years ago

The Government policy paper on the change make it fairly clear that isn't intended to catch landlords with lodgers who go on holiday for part of the time the lodger is there. The requirement is that the owner is present for "all, or part" of the period for which the property is let:
"Example 1 – An individual lets their house (their main residence) during the Wimbledon tournament to a visiting family. The individual goes on holiday for the whole period of the rental. The receipts from the rental would not be eligible for rent a room relief as there is no shared occupancy during the period of the rental. The receipts would be eligible for property allowance.
Example 2 – An individual rents a room in their main residence to a student during term time. The landlord goes on holiday for a week during the rental period. The receipts would be eligible for rent a room relief as there is shared occupancy for part of the period of the rental. The receipts would be eligible for property allowance if rent a room relief was not claimed."
The question over proof raised in the article is a fair one though. Probably not an issue for lodger arrangements, but differentiating between short term airbnb type lets of a single room while the owner is present, and the same type of let while the owner is absent is likely to be difficult.

Yvonne Francis

18:07 PM, 5th August 2018, About 4 years ago

The government consulation paper states: 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.
In the good old days when your main residence benefited from tax relief on mortgage interest and even now exempt from CGT when you sell I have never known problems proving it as your main residence and hence your home so I can't see any difficulties with proving a shared occupancy.


8:08 AM, 7th August 2018, About 4 years ago

Seems a very sensible proposal.

Alison King

15:22 PM, 7th August 2018, About 4 years ago

What about people whose job involves a lot of travel? I have a friend who works on cruise ships and relies on his lodger to keep an eye on the place when he's away.
Adding complexity is not the solution.

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