Annex 1: Minor changes in the law made by the Act: Change 130: Rent-a-room relief: removing anomaly from qualifications for relief: sections 788 and 795
This change counts any relevant balancing charge in the “total rent-a-room amount” for the purpose of establishing entitlement to the alternative method of calculation.
Under the source legislation a taxpayer with rent below the individual’s limit but whose rent-a-room income and any relevant balancing charges together exceed the limit is not eligible for either form of rent-a-room relief.
Paragraph 9(4) of Schedule 10 to F(No 2)A 1992 prevents that taxpayer from qualifying for exemption. (“Relevant balancing charges” are balancing charges which would otherwise be made under CAA in respect of any plant or machinery used in any trade or Schedule A business from which the rent-a-room income is derived.)
But neither does the taxpayer qualify for the alternative method of calculation under paragraph 11 of Schedule 10 to F(No 2)A 1992 because the rent-a-room income alone does not exceed the limit (as required by sub-paragraph (1)(b)).
Section 795 provides that, if the other conditions are satisfied, the alternative method of calculating profits (the successor to paragraph 11 of Schedule 10 to F(No 2)A 1992) is available if the “total rent-a-room amount” exceeds the individual’s limit. The “total rent-a-room amount” is defined in section 788 to include any relevant balancing charges.
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.