The UK Government has announced an agreement to retain the current rent-a-room annual relief amount of £7,500. However, a new assessment, named the “shared occupancy test” has also been proposed. The aim of the test is to ensure that landlords renting their spare rooms are able to continue qualifying for the relief.

The Association of Accounting Technicians (AAT) has voiced its concern that the new assessment will add unnecessary complications to the tax structure, among other shortfalls. In particular, the AAT is worried about how shared occupancy could be proved. The assessment of shared occupancy will effectively cause the end of the rent-a-room relief for landlords who let their entire properties, or those who let a single room during periods of vacancy. Such landlords must now rely on a much lower property allowance of £1,000 per annum.
The Head of Public Affairs and Public Policy at AAT, Phil Hall, emphasised that the tax system will experience unnecessary complexity due to the changes in shared occupancy relief.

Many landlords will now be expected to fill a self-assessment tax return, which they previously would not have needed to do. Many will also need to diligently keep record of when they are staying at their property, and when they are away from home. These measures will also likely reduce the accommodation available, and the choice of rooms, as many landlords will stop letting out their unoccupied rooms. Rent-a-room relief has become one of the limited ways that people can top-up their annual income in a tax efficient and simple manner, but the new assessment will change this. As the legislation will come into force soon, in April 2019, it remains uncertain if HMRC will expect taxpayers to authenticate shared occupancy or whether they will rely on the honesty of taxpayers.

If proof is not required, then this scheme could be susceptible to widespread abuse. However, if proof must be submitted, it is unclear how shared occupancy could be proven, especially when the tenant stays for irregular nights. The AAT is concerned that HMRC has not fully analysed the complexity of the enforcement that is required to make the scheme a success. Shared occupancy assessments will create a large headache for landlords across the country, and they are being put in place to create a merely “negligible” effect on tax receipts, according to the Treasury’s own investigation. The AAT believes that the best solution for tenants, landlords, the economy and policymakers would be to keep rent-a-room relief as it has been for 25 years, and to drop the new plans.

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