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Is FHL status mandatory

Do you have to treat rental income as FHL income of you meet the criteria

I keep going round in circles on this one .. sorry!

Client has a large house and rents out a self contained flat which is connected to and part of the house for about 250 nights a year.

For 17/18 the gross rental income from this was just over 20,000. The direct costs were 5,000 and reasonably apportioned joint costs (council tax, electricity, insurance and mortgage) were 2,000. So total actual costs were 7,000.

Client would be slightly better off using rent a room to get a deduction of 7,500 however I'm reasonably I've read that if a rental business meets the criteria for a FHL it has to be treated as such .. or is it an option that the tax payer can choose?

Thanks

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20th Jan 2019 13:24

To escape your circles, I would suggest taking a break from the FHL rules and re-reading the rent-a-room ones.

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20th Jan 2019 14:00

Thanks Taxdragon

Had a look at the rentaroom eligibility which says you are eligible if you are a resident landlord or run a BnB so I assume that means they can claim rent a room.

Just had this thought at the back of my mind that I had read that if you met the conditions for FHL (105 days rented out and 210 days available) that FHL treatment was mandatory.

Must be in a different context.

Guess I'm muddling things up hence the circles

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By Waves
20th Jan 2019 14:39

You’re definitely “muddling things up” Mr Slater.

You’ve also completely missed the point.

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20th Jan 2019 15:12

I think what people are telling you is that rent a room is exactly that. The clues is in the name. You can't use the scheme if your home is converted into separate flats. By the way it amused me that the flat is only connected to the house for 250 days what happens to it for the rest of the year?

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to lesley.barnes
20th Jan 2019 15:31

That tickled me too (I get told off when I take things too literally, so I'm glad it wasn't just me).

"Rent-a-room" though is one thing that should not be read literally. See eg PIM4004.

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