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  • Tax

    Changes to criteria for Rent A Room Relief



    On personal tax, the new rent-a-room relief test will require the individual or individuals in receipt of rental income, to have shared occupancy of the residence for all, or part of the period, of occupation which gives rise to the receipts. This is in part to tackle abuse of the system through growth of the gig economy and property apps.

    It also means that if a house is let out for say a two-week period over Wimbledon fortnight and the owner is not in residence, they will not be able to use the tax relief.

    However, the government backed down on plans to limit claims to those who rented for periods of less than 30 days, as set out in the initial consultation last year.

    This change will come into force under Finance Bill 2018-19 and draft legislation is currently out for review until 31 August 2018.

    The measure will come into effect from April 2019.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Thanks.

    Interesting policy.

    the £1000 relief still applies though to short term lets? Or is this being modifed also.

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    No change to the property income allowance as far as I can see.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    As a resident landlord I though I was up to speed on relevant legislation but I've missed this proposal. When read alongside this thread I'm surprised the proposed changes aren't more radical.

    https://www.propertytribes.com/the-astou...35334.html

    It seems the government/legislation can't keep up with changes in the gig economy.

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    Very recently issued. Not gone all the way though which was suspected.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Government repsonse here:

    https://assets.publishing.service.gov.uk...es_web.pdf

    General responses can be sent here:

    rentaroomrelief@HMTreasury.gsi.gov.uk.

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    I've seen stuff in the media which has suggested that the RAR A can be used for whole property lettings without the homeowner occupying or having the ability to occupy whenever they want.

    This obviously cannot be done with an AST letting.

    Also have seen claims of sub tenants qualifying for LL RARA etc.

    All a bit confusing to ne.

    I thought that the RAR A ONLY applied for a live-in LL or for tenants where the LL has given permission for a tenant to take on lodgers.

    I do this all the time.

    I am unable to use the RARA just because the tenant has lodgers with my permission.

    Perhaps we will see some further clarification as to what is a lodger and live-in LL and when the RAR A applues.

    It surely was not advised for lets of 1 or 5 nights.

    Perhaps we will see minimum lodger terms for RARA qualification of say 1 montb.

    Though how that would be enforced beats me.

    Clearly the RAR A is being abused by those engaged in short term letting which lodging legislation was never intended for.

    I definitely believe that the RARA should be abolished but that evidence of the lodger tenancy length should be a minimum of a month.

    Use of private houses for commercial enterprise is not what the AST and lodger system was designed for.

    Long term residential occupancy is what they were for.

    By abolishing the RARA and allowing completely tax free lodger income this will encourage long term lodger letting which will make more lettings available for tenants struggling to source rental accommodation.

    The lodger system needs to revert to what was originally intended..

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    It is currently possible to claim the RARA on the first year of an AST let as long as the landlord was resident prior to the let (More applicable to AL than BTL). The same principle applies to short term lets.

    The amendment will remove these 2 scenarios by requiring some shared residency, although taken to the extreme this can still be 1 day per let.

    The government has acknowledged that there are genuine reasons for short term lets and it is not possible to differentiate these from commercial type lets. The commercial lets have been limited, by requiring a degree of shared residency. I'm not sure if the owner would qualify for this by meeting their guests and having a coffee together?

    The most important aspect in my opinion is the decision to retain the RARA as an exemption as well as an allowance.

    The RARA is not only for lodger type sharing, whether with the owner or the tenant. It is available for anyone sharing their main home. Clarification of a lodger is a separate issue.

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    Very surprised at your first point.

    I doubt many accidental LL are aware of this facility.

    But clearly the lodger RARA was devised way before the gig economy had even been invented!

    Clearly the tax allowance system is being gamed for short-term lettings which is competing unfairly with the standard short-term lettings industry which is subject to many regulations and rightly so..

    Turning residential areas into short-term letting areas surely must be against planning regulations.

    There was never a problem with lodgers as these were effectively tenants in all but name.

    They shared the residential home of the LL even if the LL is only there 1 day per tax year.

    So there were and are usually no issues with lodgers who tend not to behave like 1 night lettings tenants.

    The whole point of the RARA was to encouage homeowners to take in long term lodgers to ease the strain on normal rental property and to provide those lodgers with more affordable accommodation in a family environment.

    Well now this RARA pricess is being abused for short term letting of days rather than months and defeats the original purpose of the RARA.

    It should not be allowed for these short- term letting arrangements.

    It would surely be very easy for HMRC to detect which homeowner should not benefit from the RARA by monitoring sites like AirBnB.

    Something must be done to stop homeowners letting out on short- term and claiming the RARA

    I have no problem with such lettings providing they are not allowed the RARA and are fully compliant in all other aspects like insurance and freeholder consents etc

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    You have a slight misunderstanding of the RARA.

    From the attached document you will see there is no stipulation for only sharing with lodgers or providing long term accommodation. However, the term 'main or only residence' does imply sharing, which is where the revision is focussed.

    "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"

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    Yep the last paragraph is my understanding as to why lodgers were the original intent of the RARA.

    The previous paragraph was clearly intended for conventional lodgers.

    Though with the advent of the gig economy it may be used for this as well though it can never have been intended for such very short term letting like AirBnB.

    This is very much a case of tax legislation being somewhat behind what is occurring now in the economy.

    The sharing economy with accommodation is mostly built on illegal letting.

    Allowing the RARA for such short term letting is clearly not what it was originally intended for.

    How HMRC will address this issue remains to be seen.

    They will struggle to police such letting in private homes.

    But the big fear for normal residential areas is that such gig economy short term letting will affect such areas.

    It clearly should be the case that the LL should be available at their property.

    We all hear the nightmare of flats being let out on AirBnB and the issues such short -term guests cause.

    Issues that lodgers rarely cause.

    I have no idea how this situation could ever be policed.

    But the problems such short -term lettings cause will need to be resolved





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