Renting a room via Airbnb - Question

[robbie_db]

Hi All,

I hope someone can help me with the following,

- I rent a private room (plus bathroom) in my home which I own (an apartment), via Airbnb

When completing my tax return for 2016/17 it's clear I have two options,

1) Use the £7,500 rent-a-room allowance to offset against my gross income and no other deductions.
2) Treat the income from renting my room in the normal way a BTL is treated and therefore offset various deductions against it (ongoing costs such as a % of mortgage interest, council tax, utilities and one off maintenance & repair costs that relates directly to the rented areas of the apartment). In my case I have allowed 50% of those ongoing costs as a deduction since guests staying here have approximately 50% of the apartment to themselves.

In my case, the deductions from 2) above are about £10,500 so higher than the rent-a-room allowance of £7,500.

Taking route 2) above would lead to a lower tax bill this year. However, my question relates to the implications of taking route 1 or 2 above and the PPR on my home,

Does taking route 2 over route 1 change the treatment of PPR on my home?

Many Thanks in advance

[bd6759]

Are you saying that 505 of your house is used by others 100% of the time? If so, then that 50% is not part of your home.

[robbie_db]

I have a 2 bedroom, 2 bathroom apartment. I live alone. So guests use the second bedroom and bathroom. And share the lounge, kitchen & dining room with me as and when they want to use it.

It's still my home. I can only sleep in one bed at a time and use one bathroom at a time. Otherwise those rooms would just remain empty.

Hope that clarifies?

[robbie_db]

Sorry, just to follow up on 'occupancy'. Typically between 70-100% depending on the month.

[bd6759]

The test is "wholly and exclusively".

If the bedroom and bathroom are used exclusively for the business, the costs attributable to that area will be allowed. It should be apportioned using the area, and is unlikely to be 50%. That area will not be part of your home for PPR purposes.

The shared spaces will not be exclusively used for the rental business whilst they are empty or whilst you occupy them (whether or not guests also occupy them at the same time as you). You will need to further reduce the proportion of shared space to the period that are used exclusively by guests.

All in all, you are better with rent a room.

[robbie_db]

Following on from your advice, am I right in thinking 'rent-a-room' makes no impact on the PPR?

[robbie_db]

Sorry just following up on this again so I'm clear. Appreciate your feedback.

So am I right in thinking 'rent-a-room' makes no impact on the PPR?

[wamstax]

I think that you should take a look at HMRC Manuals at CG 64700 et seq (link https://www.gov.uk/hmrc-internal-manual ... al/cg64700)

CG64702 says
Private residence relief: letting: lodger
SP14/80
SP14/80 sets out the position for CGT purposes where an individual lets out all or part of their home. Where a lodger lives as a member of the owner’s family, sharing their living accommodation and taking meals with them, no part of the accommodation should be treated as having ceased to be occupied as the owner’s main residence. The relief should not be restricted at all.
The reference to a lodger is important. The domestic arrangements of individuals are endlessly variable and you must aim to operate the statutory code flexibly and fairly. A distinction was intended by the Statement of Practice between a person who takes a single lodger into their home and a person who is running a lodging house as a business. The relief available to the latter should be restricted. The Board considers that the number of lodgers is a sensible and practical way of distinguishing between these two cases. So you should not consider any restriction of relief where there is a single lodger but should restrict the relief to an appropriate extent where there is more than one lodger. If relief is restricted a further relief may be due under TCGA92/S223 (4), see CG64710+.

I would question whether you are entitled to treat each guest as a lodger and this may be a point of argument as regards your suggestion that Rent-a-room scheme applies to your income.

Admittedly HMRC manuals are not law but they give an indication as to where differences of opinion might arise and potential enquiries that could arise assuming that HMRC knows that you are effectively operating a "guest house" via AirBnB. I can imagine HMRC Snoopers getting lists of such participants at some time (if they don't already have them) and considering the entries in tax returns or tax evasion with all such income being concealed by the relevant individual.