Press release: Survey results suggest caution on changes to rent-a-room relief

2. The concern is whether it is reasonable that someone who rents out a room in a more limited fashion for holiday purposes can benefit from a relief which a full time B&B with a number of rooms would not receive the same or any benefit from. The relief applies to gross rental receipts. It applies in full where gross rental receipts are £7,500 or less. Where rental receipts exceed £7,500 as would be expected for a B&B or guest house operating on a commercial basis, the business can opt to calculate its taxable profits either by deducting £7,500 from its gross rental or the actual expenses. In practice, the actual expenses are likely to give a more preferable result so the business pays tax on its actual profits in full with no benefit from the rent-a-room limit. 

On the other hand any restrictions which are introduced will result in the relief being less flexible, more complex, and result in those providing short term accommodation at times of peak demand (e.g. during the Edinburgh Festival, Wimbledon etc) being more likely to have to declare taxable income.

3. The Government has limited information on the use of the relief as the vast majority of users are not in the self-assessment system. Where an individual is eligible for the relief they are not required to make a claim for it, unless they complete a self-assessment return for another reason. Approximately 50,000 people claim the relief through self-assessment, with a further 200,000-300,000 individuals estimated to be using the relief who are outside the self-assessment system and about whom little is known. The original call to evidence is available here[1].

The call for evidence was issued to:

  • better understand how the relief is currently used
  • understand whether or not the relief is working as the Government intends
  • help inform any potential reform.

The ATT’s submission to the Treasury can be found here[2] and the CIOT response here[3].  The full survey results can be found as an appendix to the ATT response. The survey closed on 12 February 2018 and there were 687 responses.  The Treasury is currently processing feedback to the call. 

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