RAR and a self employed lodger

katejo

I know that the rent a room scheme has certain restrictions on a lodger using the room as an office. I have read the guidelines which say that you can have someone who does private study evenings and weekends but it is not clear whether a self employed lodger cannot do any work from home during the day. Can anyone help with this?
In general I don't want someone who will stay at home for most of the day due to increased heating costs not covered by inclusive rent but I am wondering whether there is an additional problem.

agrinnall

I don't know about the restrictions, but unless the lodger themselves claims tax relief for use of the property how would HMRC ever know that they were doing a bit of work there?

katejo

agrinnall wrote: »

I don't know about the restrictions, but unless the lodger themselves claims tax relief for use of the property how would HMRC ever know that they were doing a bit of work there?

Yes maybe but I don't know how they do their checks for such things.

PasturesNew

He pays you rent, you operate under the RAR scheme. End of trail.
He rents a room and is self-employed. He has an option to claim some of that cost against his tax return, but it's probably not worthwhile as it's probably equivalent to 5% of his rent or less.

Nicola_Ed

Hi - the below from HMRC should confirm the position - see the highlighted red text.
PIM4001 - Rent-a-room: introduction

Overview
Legislation
Qualifying individuals
What income does it apply to?
Meaning of 'residence'
When the taxpayer has more than one home
The accommodation provided
Basis periods
Overview

Rent-a-room applies to income from providing furnished residential accommodation in the taxpayer’s only or main home, on or after 6 April 1992. For example, a taxpayer may benefit where they take in a lodger. The rules either exempt rental income or tax it on a more favourable basis.
Under rent-a-room a taxpayer can be exempt from IT on profits from furnished accommodation in their only or main home if the gross receipts they get (that is, before expenses) are £4,250 or less - see PIM4012. But they can’t then claim any of the expenses of the letting - see PIM4020.
In addition, receipts over the £4,250 exemption limit can be taxed on an alternative basis that may produce a lower tax bill. Briefly, the excess of the gross receipts over the exemption limit is treated as the taxable rental income instead of the actual profit. But they can’t then claim any of the expenses of the letting - see PIM4030.
For the purposes of the rent-a-room scheme, gross receipts include not only rents but also payments made to the taxpayer for the provision of any other goods or services (such as meals, cleaning, laundry etc) in connection with the letting.
The £4,250 limit may be halved if someone else gets rents from letting the same home (see below).
The rent-a-room scheme applies to ordinary lettings of living accommodation in the taxpayer’s own home. It does not apply to rooms let as an office or for other business purposes, see PIM4002. But the scheme applies to genuine lodgers who study at home or who do some of their business work at home in the evenings or at weekends.
Where a taxpayer has taxable receipts after rent-a-room has applied, they are normally taxable as property income together with the rest of their rental business income (if they have any). In some cases, income from a lodger etc may be taxed separately as a trade (see below).
Rent-a-room applies to people who let a room in a home they rent as well as to people who own their homes. It isn’t relevant for tax but taxpayers may want to check whether:

• their lease allows them to take in a lodger (where they rent their home),
• their lender minds them taking in a lodger (where they have a mortgage on their home),
• their insurance company is content; their cover may not be adequate if circumstances have changed.