HMRC Rent a Room Scheme

glerwill

Hi,
we provide 'supported lodgings' which incl food, all bills and assistance to 2 separate teenagers leaving care for the local council. I am a higher rate taxpayer, my wife a basic rate taxpayer (£3240 PA).

Income from this is approx £16K.

You can use the Rent a Room scheme to claim up to £4250 OR declare income and allowable expenses.

My questions are twofold

- could we claim the £4250 twice (once for each teenager).

- would we better off declaring income and expenses.

My assumption is that we do everything via my wife, rather than jointly.

thank you for any advice

Graham

HappyMJ

No you can't have two allowances and you should do it jointly i.e £2,125 tax free each. You would probably be better off declaring all income and expenses related to the letting of the rooms.

glerwill

Thanks HappyMJ,
I thought that was the answer on whether one allowance or two....... but the website (direct gov) was a little vague. Why would it be better to claim jointly?

rgds

Graham

jennifernil

It's not that it's better jointly, (for you it is not as you are a higher rate taxpayer) but if you own the house jointly you have no choice.

jimmo

jennifernil wrote: »

It's not that it's better jointly, (for you it is not as you are a higher rate taxpayer) but if you own the house jointly you have no choice.

That would be correct for letting income but this is “supported lodgings”.
Whilst we don’t have a definition of “supported lodgings” I assume that at the very, very least that is the equivalent of providing bed and breakfast plus an evening meal.
In which case the income is generated from trading, like a hotel or guesthouse, rather than from letting.
Take a look at Lodgers and tenants in your own home in this link.
http://www.hmrc.gov.uk/manuals/pimmanual/PIM1112.htm
As this is trading income it is perfectly acceptable for your wife to declare herself as being a sole trader and earning all the income generated.
I also wonder whether “supported lodgings” could be considered to be within the arrangements for foster and adult placement carers where something more generous than Rent a Room is available.
http://www.hmrc.gov.uk/helpsheets/2010/hs236.pdf

jennifernil

http://www.bristol.gov.uk/page/neighbourhoods-supported-lodgings-scheme

Jimmo, you are correct, I found the above, it is indeed treated like fostering. So no tax at all to pay apparently.

I must say I am very surprised that the council did not give the OP any information on the tax position.