Property Allowance and Rent a Room Scheme for different incomes, same property

kfahri342

Hi there,

I am hoping someone can clarify something, with regards to using both Property Allowance and Rent a Room Scheme Allowances.

I am a resident tenant who rents their room out to a lodger, I am also someone who rents out their driveway and this all happens from the same (one) property.

My question is, can i use the rent a room scheme allowance (£7,500) on the lodger income and the property allowance (£1,000) toward the income i make from my driveway, even if both incomes derive from the same land/property?

All the example i read online about using both allowance use an example of two properties. So I would like to get this clarified, as I am struggling to find official documentation that references this

Many Thanks

Jeremy535897

This is complex, and Croner explains it as follows:
"New section 783BM excludes individuals from relief under this chapter in two circumstances where the individual qualifies for rent-a-room relief in respect of rent-a-room receipts. The first is where those receipts are below the rent-a-room relief limit given in section 789 ITTOIA and the individual makes an election under section 799 to dis-apply the full rent-a-room relief for the tax year. The second is where the individualʼs rent-a-room receipts exceed the rent-a-room relief limit given in section 789, and the individual chooses not to make an election for the alternative calculation of profits described in section 800 but instead opts to calculate profits by deducting expenses incurred from their rental income. The intention is to prevent individuals from using the property allowance if they choose to deduct actual expenses in calculating the profits of any other property business."
From https://library.croneri.co.uk/cch_uk/bfb2017-02/fbn2017-08_17

So if you have rent a room income, and accept the normal rent a room relief (£7,500 where the income is £7,500 or less, or the formula that gives partial relief if the income exceeds £7,500), you should be able to claim the property allowance against other property income, whether that derives from the same property or not, but not against the rent a room income if that exceeds £7,500.

kfahri342

Thank you so much! And thanks for the link. Super clear, much appreciated!

unholyangel

https://www.legislation.gov.uk/ukpga/2005/5/section/785

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4012

Both imply you can't use rent a room relief if you have other property income for the same property which is not rent a room receipts. 

Jeremy535897

I think you are correct if the other income is in respect of the residence itself, as per PIM 4012:

"Furnished and unfurnished lettings in the same residence
Rent-a-room applies to furnished lettings only. If the taxpayer has any unfurnished letting in his only or main residence, then he or she is not a qualifying individual. Therefore any furnished letting the same taxpayer has in the same residence cannot attract rent-a-room relief."

This doesn't seem to cover letting out a driveway in the grounds of the residence. See section 787:

"787Meaning of “residence”

(1)In this Chapter “residence” means—

(a)a building, or part of a building, occupied or intended to be occupied as a separate residence, or

(b)a caravan or houseboat.

(2)If a building, or part of a building, designed for permanent use as a single residence is temporarily divided into two or more separate residences, it is still treated as a single residence."

It all turns on what section 785(1)(b) means:

"785Person who qualifies for relief

(1)An individual qualifies for rent-a-room relief for a tax year if the individual—

(a)has rent-a-room receipts for the tax year (see section 786), and

(b)does not derive any taxable income other than rent-a-room receipts from a relevant trade, letting or agreement.

(2)“Taxable income” means receipts or other income in respect of which the individual is liable to income tax for the tax year.

(3)A relevant trade, letting or agreement is one from which the individual derives rent-a-room receipts for the tax year."

The example given in PIM 4012 and 4030 looks at lettings in residences (guest house and lodger).