Director of his own ltd co rents out part of his house to his personal ltd co (with a license agreement in place).
He has also had a lodger for part of the year, bringing in around £2k
Director owns the property 100% and has lived the whole year.
My question is - can he still claim Rent a Room relief on the income from the lodger if he has also rented another part of the property to his company? I am not intending to claim any Rent a Room relief on any of the income from the company, just querying the income from the lodger.
Many thanks in advance!
Replies (9)
Please login or register to join the discussion.
ITTOIA 2005 s 785(1) says that an individual qualifies for rent a room relief for a tax year if the individual does not derive any tazable income other than renta a room receipts from a relevant trade letting or agreement.
Defintion of "a relevant trade, letting or agreement"
I have looked at ITTOIA 2005 s 785 (1) and the precise wording is as per LyneT's post, with a further clarification that "A relevant trade, letting or agreement is one from which the individual derives rent-a-room receipts for the tax year". I would read this to mean that, as long as the part of the individual's income which is attributable to rent from the limited company is not coming from the same source as the rent a room receipts (which it clearly is not - the lodger and the company cannot be the same person!) then there would appear to be no such restriction on rent a room relief. What would your thoughts be on this?
@ Sparkler
That's also my interpretation, but HMRC don't agree (see the Furnished and Unfurnished Lettings part of PIM4012 that Ardeninian refers to) and ultimately the tax on £4,250 less actual expenses probably won't be arguing over.
Simons...
... just seems to have reworded the paragraph from HMRC's manuals.
I agree the legislation could be clearer. Another way of interpreting S. 785(1) is that if the taxpayer has any taxable income (at all) other than the rent-a-room receipts, then they don't qualify.
Surely the legislation takes priority?
... just seems to have reworded the paragraph from HMRC's manuals.
I agree the legislation could be clearer. Another way of interpreting S. 785(1) is that if the taxpayer has any taxable income (at all) other than the rent-a-room receipts, then they don't qualify.
But it seems that the legislation is fairly clear, when the definition of the "relevant trade or letting agreement" is considered! And that the confusion lies in HMRC's own manual. Which takes priority? In a different example, we all know that HMRC says that directors have to complete a tax return, but that the legislation does not require this. I am of the understanding that the legislation takes priority, so I am not quite sure why this situation is different, and that HMRC's guidance takes priority over the legislation.
Tax law does prevail
It's just that to get the treatment of the law, rather than HMRC's treatment you'd need to go to tribunal. Even then, HMRC would argue that, originally coming from a concession as it does, that the law is intended to mean what they say it means.
Given the ambiguity in the wording of S. 175(1)(b) their could be a reference to material to establish the intentions of the legislation.
It's a question whether in any specific case the tax on the £4,250 less the actual expenses would be worth taking it to tribunal and perhaps still losing. Personally, I'm hard-pressed to see a situation where it would be worth going to tribunal.