Commentary on Sections Part 7: Income charged under this Act: rent-a-room and foster-care relief Overview Section 785: Person who qualifies for relief
2928.This section states the basic conditions that an individual must satisfy to obtain the relief. It is based on paragraph 2 of Schedule 10 to F(No 2)A 1992.
2929.Subsection (1)(a) is a general condition that is satisfied only if the taxpayer claiming rent-a-room relief satisfies the more detailed conditions in respect of the letting.
2930.Subsection (1)(b) helps in restricting the relief to the simpler cases for which it is intended. In referring to the income types to which rent-a-room relief is relevant it avoids reference to a “source” – the term used in paragraph 2(3) of Schedule 10 to F(No 2)A 1992 – because what is meant by a “source” in this context may not always be clear. So in rewriting references to a “source”, subsection (1)(b) refers to trades, lettings or agreements.
2931.Paragraph 2(3) of Schedule 10 to F(No 2)A 1992 disqualifies an individual from relief if the income from any source from which his or her rent-a-room income is derived also includes income that is not rent-a-room income. “Source” is not defined.
2932.The source of the income arising from a trade is the trade itself.
2933.When Schedule 10 to F(No 2)A 1992 was enacted, relief was available on income from furnished lettings if the income fell within Schedule D Case VI (rather than Schedule A). The source of such income was considered to be the letting in question. FA 1995 brought income from furnished lettings in the United Kingdom within Schedule A and consequentially amended Schedule 10 to F(No 2)A 1992 to make relief available on such income. The amendment was not intended to be read as changing the source of the income for the purposes of that Schedule. For a Schedule A business to be a “source” for this purpose could have capricious results: running a separate business of letting commercial property would disqualify an individual from rent-a-room relief on Schedule A income for letting a room in his or her house (but rent-a-room relief could still be available to a person who ran both a bed-and-breakfast business at home and a separate commercial trade).
2934.As regards amounts incidental to the letting, and within Schedule D Case VI, on which rent-a-room relief might be available (for example, receipts for goods or services such as meals or laundry) the source of the income is the agreement to provide the goods or services in question.
2935.So subsection (1)(b) refers to whatever is the appropriate source for each kind of income for which rent-a-room relief is available.
2936.Section 785, unlike the provision in paragraph 2(1) of Schedule 10 to F(No 2)A 1992, does not impose the condition that to be within rent-a-room, all the letting income (or income related to a letting) must be trade or UK property business income. Specifically, it allows rent-a-room relief to apply where certain income related to a letting is received that would, in the source legislation, be within Schedule D Case VI. The existence of any such amounts would, under the source legislation, disqualify the taxpayer from rent-a-room relief in respect of all his or her income. See Change 128 in Annex 1.
2937.The approach in subsection (1)(b) also removes a potential disqualification from rent-a-room relief in particular circumstances. See Change 129 in Annex 1.