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Rent a Room relief provides up to £7,500 tax-free income that can be received from renting out a room or rooms in an individual’s only or main residential property.

The government proposed scrapping or substantially amending the relief in a recent public consultation but has now announced that it will be retained at its current level of £7,500 per annum.

However there is a sting in the tail….There will now be a ‘shared occupancy test’ which means that relief can only be claimed when the landlord is present at the property during the rental period.

There is every likelihood therefore that this shared occupancy test will effectively bring an end to rent-a-room relief for those renting their whole properties out or who rent out a single room whilst they are away. Absent landlords will have to rely on the much lower £1,000 property allowance instead.

The test will place an unnecessary burden on landlords and limit the amount of accommodation available and although the legislation is due to come into force shortly (April 2019) it remains unclear as to whether or not HMRC will require taxpayers to prove their shared occupancy or if they are simply relying on taxpayers honesty.

If no proof is required then the scheme will be open to widespread abuse. If proof is required, it’s difficult to see exactly how shared occupancy can be proven in practice, especially when this may relate to irregular nights here and there.

So the shared occupancy test is a headache being created for what the Treasury’s own analysis states will be a “negligible” impact on tax receipts. 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 but we shall see.

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