Concerns that Rent a Room tax relief changes could cause “unnecessary complexity”

The Association of Accounting Technicians (AAT) has called on the Government to rethink its proposals to reform Rent a Room tax relief, amid concerns that the changes could result in “unnecessary complexity.”

In recent days, the Government has unveiled plans to introduce a so-called ‘shared occupancy test’, which would see that anyone who rents out a room in their home is only able to claim the relief if they are ‘present’ at the time the room is being rented.

In its policy paper, the Government said: “Those taxpayers that do not satisfy this test will no longer be eligible to claim Rent a Room relief.”

Under the existing rules, landlords or anyone else renting out a room in their main residential property are able to earn up to £7,500 a year tax-free. Furthermore, many of those who enjoy this relief rent out their rooms while they are away.

At current, the new rules are due to be introduced in April 2019. However, at this stage, it remains unclear whether or not HM Revenue & Customs (HMRC) will require landlords to ‘prove’ their shared occupancy in order to claim Rent a Room relief.

The AAT has voiced concerns that either way, the proposed changes would prove problematic.

On one hand, it says that if a burden of proof was introduced, this would force landlords to keep “laborious” records of which dates they were – and were not – at home each year.

On the other hand, if the Revenue decides not to introduce a burden of proof, this could inadvertently encourage “widespread abuse” of the system.

“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,” an AAT spokesperson said.

“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.”

It also warned that the proposals could force those taxpayers who let out rooms whilst they are away to have to rely on the much lower £1,000 property allowance instead of Rent a Room relief in the near future.