Can lodger work from home?

1404

pieroabcd said:

1404 said:

pieroabcd said:

It *seems* to imply that having 1 Vs 2 lodgers makes a difference with regards to having a letting/business use.

Anyone has more knowledge on the subject?

If you're asking about CGT when you sell, what part of my breakdown isn't clear? 

My question is if the CGT applies even if the owner has had only one lodger at any time during his ownership (rather than 2).

My understanding is yes, it does apply. But the percentage of your property let would be less (only one room, presumably). 

You'd be very unlikely to have to pay CGT. Why not work it out using the formula I've provided. If the formula is wrong then I'm sure someone on here will tell us. 

I've worked it out for my property for 1-5 lodgers (not that I have that many rooms).

It's only when I get to 4 lodgers that I have to pay CGT.

1404

pieroabcd said:

It *seems* to imply that having 1 Vs 2 lodgers makes a difference with regards to having a letting/business use.

Anyone has more knowledge on the subject?

I can't see anything in your link about the difference between 1 v 2 lodgers?

Bookworm105

pieroabcd said:

1404 said:

pieroabcd said:

It *seems* to imply that having 1 Vs 2 lodgers makes a difference with regards to having a letting/business use.

Anyone has more knowledge on the subject?

If you're asking about CGT when you sell, what part of my breakdown isn't clear? 

My question is if the CGT applies even if the owner has had only one lodger at any time during his ownership (rather than 2).

it is a fundamental principle that CGT liability applies to the sale of all property, the real issue is what relief is available to offset that liability

- if the owner has lived in the property as their only/main residence for the entire ownership period then they get 100% Private Residence Relief (PRR) so CGT liability = zero 

- on the other hand, if the property has, at the same time, been occupied by more than the owner & spouse/children, ie it includes a lodger, then PRR is restricted

- the restriction is applied to the part of the building which is not occupied by the owner as their main home, ie it is occupied by 1 or more lodgers instead.

- Where there is more than 1 lodger, then a decision needs to be made as to whether Lettings relief is available at all . If the owner is now running a lodging house as a business rather than as their own home then it is not. That is a matter of the individual circumstances and may need to go to court for a judgement.
 CG64702 - Private residence relief: letting: lodger - HMRC internal manual - GOV.UK

- where Lettings Relief is available, then it is capped at a maximum of £40,000

There is no proscriptive methodology for working out how the % of the building which is not occupied as the main home. You may, for example, base it on number of bedrooms occupied by lodgers compared to all other rooms (*), or you may do it by respective floor area (M2)

* for reasons I don't know, there is a convention that bathrooms and toilets are excluded from the total room ./ floorspace count

Bookworm105

horsewithnoname said:

Bookworm105 said:

user1977 said:

Bookworm105 said:

subjecttocontract said:

It seems that HMRC haven't moved with the times. WFH is the new normal for a large proportion of working age people AND surprise, surprise they WFH during the daytime. I guess HMRC might eventually get around to understanding how the new world order operates ! Although I wouldnt expect to much to soon.

indeed, they are still living in the early 1990s, but then legislation has not kept up so not really their fault as they don't make the legislation, they merely apply it 
PIM4002 - Rent-a-room: letting as office accommodation - HMRC internal manual - GOV.UK

That guidance doesn’t seem relevant here as it’s talking about rooms which are actually offices, not merely bedrooms having an ancillary “working from home” purpose.

I linked to the legislation above, and unless there’s some other legislation I’ve missed, it doesn’t seem to exclude WFH.

the relevance is that is the only publicly available info we have on HMRC's thought processes regarding lodger "activity" under rent a room.
It demonstrates the point that they have not kept up. It also demonstrates that even back then they openly admit a lot is their own interpretation, not the black and white of legislation. 
as ever with tax, it is elf assessment, you can claim what you like but ultimately you must be willing to go before a First Tier Tribunal if your interpretation of legislation is not the same as HMRC's, or as you say, there nothing explicit about a specific matter.

All legislation is subject to interpretation by the courts, not much legislation is black and white, hence the number of tax dodging schemes where the greedy try to “interpret” the law in ways it was never intended. 

horsewithnoname said:

Bookworm105 said:

user1977 said:

Bookworm105 said:

subjecttocontract said:

It seems that HMRC haven't moved with the times. WFH is the new normal for a large proportion of working age people AND surprise, surprise they WFH during the daytime. I guess HMRC might eventually get around to understanding how the new world order operates ! Although I wouldnt expect to much to soon.

indeed, they are still living in the early 1990s, but then legislation has not kept up so not really their fault as they don't make the legislation, they merely apply it 
PIM4002 - Rent-a-room: letting as office accommodation - HMRC internal manual - GOV.UK

That guidance doesn’t seem relevant here as it’s talking about rooms which are actually offices, not merely bedrooms having an ancillary “working from home” purpose.

I linked to the legislation above, and unless there’s some other legislation I’ve missed, it doesn’t seem to exclude WFH.

the relevance is that is the only publicly available info we have on HMRC's thought processes regarding lodger "activity" under rent a room.
It demonstrates the point that they have not kept up. It also demonstrates that even back then they openly admit a lot is their own interpretation, not the black and white of legislation. 
as ever with tax, it is elf assessment, you can claim what you like but ultimately you must be willing to go before a First Tier Tribunal if your interpretation of legislation is not the same as HMRC's, or as you say, there nothing explicit about a specific matter.

All legislation is subject to interpretation by the courts, not much legislation is black and white, hence the number of tax dodging schemes where the greedy try to “interpret” the law in ways it was never intended. 

yes, fully aware of that, hence I referred to HMRC interpretation and be willing to go in front of a (Tax) Tribunal (or court if you prefer that word) to get a judgement 

1404

Bookworm105 said:

pieroabcd said:

1404 said:

pieroabcd said:

It *seems* to imply that having 1 Vs 2 lodgers makes a difference with regards to having a letting/business use.

Anyone has more knowledge on the subject?

If you're asking about CGT when you sell, what part of my breakdown isn't clear? 

My question is if the CGT applies even if the owner has had only one lodger at any time during his ownership (rather than 2).

it is a fundamental principle that CGT liability applies to the sale of all property, the real issue is what relief is available to offset that liability

- if the owner has lived in the property as their only/main residence for the entire ownership period then they get 100% Private Residence Relief (PRR) so CGT liability = zero 

- on the other hand, if the property has, at the same time, been occupied by more than the owner & spouse/children, ie it includes a lodger, then PRR is restricted

- the restriction is applied to the part of the building which is not occupied by the owner as their main home, ie it is occupied by 1 or more lodgers instead.

- Where there is more than 1 lodger, then a decision needs to be made as to whether Lettings relief is available at all . If the owner is now running a lodging house as a business rather than as their own home then it is not. That is a matter of the individual circumstances and may need to go to court for a judgement.
 CG64702 - Private residence relief: letting: lodger - HMRC internal manual - GOV.UK

- where Lettings Relief is available, then it is capped at a maximum of £40,000

There is no proscriptive methodology for working out how the % of the building which is not occupied as the main home. You may, for example, base it on number of bedrooms occupied by lodgers compared to all other rooms (*), or you may do it by respective floor area (M2)

* for reasons I don't know, there is a convention that bathrooms and toilets are excluded from the total room ./ floorspace count

Well, this is new information to me yet again. Everytime I think I know what I need to know something like this comes up. Some unwelcome law/regulation that potentially spells trouble/cost. It never ends.  

I have two lodgers, but have variably in the past had 1/2/3 lodgers. I've lived in the house the entire time.  This is the first time I've heard that Lettings Relief may not be available due to having more than one lodger. 

Does anyone know what my CGT liability may be? 

Bookworm105

1404 said:

Does anyone know what my CGT liability may be? 

Gain minus available relief minus CGT allowance

whether you were running a property trading business rather than taking in lodgers should be self evident

1404

Bookworm105 said:

1404 said:

Does anyone know what my CGT liability may be? 

Gain minus available relief minus CGT allowance

whether you were running a property trading business rather than taking in lodgers should be self evident

What's the difference between the two, please? 

pieroabcd

Bookworm105 said:

pieroabcd said:

1404 said:

pieroabcd said:

It *seems* to imply that having 1 Vs 2 lodgers makes a difference with regards to having a letting/business use.

Anyone has more knowledge on the subject?

If you're asking about CGT when you sell, what part of my breakdown isn't clear? 

My question is if the CGT applies even if the owner has had only one lodger at any time during his ownership (rather than 2).

it is a fundamental principle that CGT liability applies to the sale of all property, the real issue is what relief is available to offset that liability

- if the owner has lived in the property as their only/main residence for the entire ownership period then they get 100% Private Residence Relief (PRR) so CGT liability = zero 

- on the other hand, if the property has, at the same time, been occupied by more than the owner & spouse/children, ie it includes a lodger, then PRR is restricted

- the restriction is applied to the part of the building which is not occupied by the owner as their main home, ie it is occupied by 1 or more lodgers instead.

- Where there is more than 1 lodger, then a decision needs to be made as to whether Lettings relief is available at all . If the owner is now running a lodging house as a business rather than as their own home then it is not. That is a matter of the individual circumstances and may need to go to court for a judgement.
 CG64702 - Private residence relief: letting: lodger - HMRC internal manual - GOV.UK

- where Lettings Relief is available, then it is capped at a maximum of £40,000

There is no proscriptive methodology for working out how the % of the building which is not occupied as the main home. You may, for example, base it on number of bedrooms occupied by lodgers compared to all other rooms (*), or you may do it by respective floor area (M2)

* for reasons I don't know, there is a convention that bathrooms and toilets are excluded from the total room ./ floorspace count

Thanks.
That link is useful and confirms what the .gov page that I found reads (full relief in case of a/1 lodger).
Do you know if by "a lodger" they mean
- one lodger only at any given time
- or one lodger one off 
? In the former case the owner may decide to replace the only lodger while retaining the full relief, while on the second case maybe the case of more than one lodger would kick in, even though they had only one lodger at any given time?

1404

For those with more than one lodger:

When working out how much of your house is let it's much better to use percentage of the house rather than rooms. 

Eg: you have a 3 storey house, have 7 rooms and let 3 of them. 3/7 = 43%. But 3 rooms aren't likely to be 43% of a 3 storey townhouse.

Uriziel

I think your word choice could be better. When people say WFH usually they mean that they have an office somewhere but choose to work from home here and there. However what you are describing is that your lodger is running a business from home. It has absolutely no connection to their actual job. They would end up registering your address on company's house as their business address which makes it a business residence. You would be liable for all kinds of business regulations. I would ask them if they are planning on using your address as their official business address.