Rent A Room Scheme - and Split House

[Mikeww]

Under the Rent a Room Scheme someone can rent out a room in their own
home to someone (for residential purposes) and obtain up to (I think)
£4250 in the year tax free.

I have seen a terraced house for sale which is still legally one
property, but the first floor has been made into a self-contained
unit, and the ground floor has also been made into another
self-contained unit.

If I lived in one "unit" (one floor of the house), and I rented out
the other floor at no more than the rent-a-room threshold, would
Inland Revenue still consider this as coming under rent-a-room and
therefore tax free?

Or would they consider it as being a rental property?

 

[Peter Saxton]

Under the Rent a Room Scheme someone can rent out a room in their own
home to someone (for residential purposes) and obtain up to (I think)
£4250 in the year tax free.

I have seen a terraced house for sale which is still legally one
property, but the first floor has been made into a self-contained
unit, and the ground floor has also been made into another
self-contained unit.

How do you mean "legally"? In what way is it legally one property?

If I lived in one "unit" (one floor of the house), and I rented out
the other floor at no more than the rent-a-room threshold, would
Inland Revenue still consider this as coming under rent-a-room and
therefore tax free?

Or would they consider it as being a rental property?

If each unit has a separate entrance I don't think they can both be
described as your "home".



(e-mail address removed)

 

[John Pointon]

Under the Rent a Room Scheme someone can rent out a room in their own
home to someone (for residential purposes) and obtain up to (I think)
£4250 in the year tax free.

I have seen a terraced house for sale which is still legally one
property, but the first floor has been made into a self-contained
unit, and the ground floor has also been made into another
self-contained unit.

If I lived in one "unit" (one floor of the house), and I rented out
the other floor at no more than the rent-a-room threshold, would
Inland Revenue still consider this as coming under rent-a-room and
therefore tax free?

Or would they consider it as being a rental property?

You are absolutely correct in assuming that someone can rent out a
room in their own home for residential purposes and receive up to
£4,250 by way of rent for their part of the accommodation tax free.

The legislation is contained in Schedule 10 of Finance Act (No 2) 1992
although it dates back to Finance Act 1996.

Clause 4 states "A residence is a qualifying residence if it is the
individual's only or main residence". Clause 7 interestingly says
"residence" means a building, or part of a building, occupied or
intended to be occupied as aa seperate residence, or a caravan or
houseboat; but a building, or part of a building, which is designed
for permanent use as a single residence shall be treated as a single
residence notwithstanding that it is temporarily divided into two or
more parts which are occuped or intended to be occupied as seperate
residences."

Unfortunately, the Revenue's leaflet IR87 "Letting and your home"
which can be seen at www.inlandrevenue.gov.uk//pdfs/ir87.htm giveS NO
indication as to what is meant by "temporarily divided into two or
more parts", nor do the notes on Land and Property accompanying the
2003 Self Assessment Return.

One suspects - and this is pure guesswork - that if portions of the
premises enjoy seperate mains facilities ie seperate gas and
electricity meters and are seperately assessed for water rates, then
they would not be regarded as temporarily divided.

That is the best I can do. Hope it helps.




John Pointon
"In business to grow your business"

 

[Mikeww]

How do you mean "legally"? In what way is it legally one property?

AFAIK, it has only one set of deeds to cover the whole house. It's
all one property. It's not a house which has been split into
self-contained units and then different deeds drawn up for each unit.

So, the one person owns the whole house.

If each unit has a separate entrance I don't think they can both be
described as your "home".

It'd be the same shared front door into the house, then either along
the hall for the ground floor "unit". Or up the stairs for the
upstairs "unit".

 

[Mikeww]

You are absolutely correct in assuming that someone can rent out a
room in their own home for residential purposes and receive up to
£4,250 by way of rent for their part of the accommodation tax free.

The legislation is contained in Schedule 10 of Finance Act (No 2) 1992
although it dates back to Finance Act 1996.

Clause 4 states "A residence is a qualifying residence if it is the
individual's only or main residence". Clause 7 interestingly says
"residence" means a building, or part of a building, occupied or
intended to be occupied as aa seperate residence, or a caravan or
houseboat; but a building, or part of a building, which is designed
for permanent use as a single residence shall be treated as a single
residence notwithstanding that it is temporarily divided into two or
more parts which are occuped or intended to be occupied as seperate
residences."

Unfortunately, the Revenue's leaflet IR87 "Letting and your home"
which can be seen at www.inlandrevenue.gov.uk//pdfs/ir87.htm giveS NO
indication as to what is meant by "temporarily divided into two or
more parts", nor do the notes on Land and Property accompanying the
2003 Self Assessment Return.

One suspects - and this is pure guesswork - that if portions of the
premises enjoy seperate mains facilities ie seperate gas and
electricity meters and are seperately assessed for water rates, then
they would not be regarded as temporarily divided.

That is the best I can do. Hope it helps.

John Pointon
"In business to grow your business"

Thanks very much for this John. This is very helpful. I hadn't
though about the seperate meters aspect. I shall look into this.

Thanks again.

 

[David France]

Hi Mike,

I think they would consider it a rental property. However It would be better for you to seek professional opinion from a legal expert in the field.