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HMRC internal manual

Property Income Manual

Rent-a-room: elections and time limits

Summary

There are time limits within which the taxpayer must tell HMRC if:

  • they don’t want to be exempt when their gross receipts are below the exemption limit of £7,500 (or £3,750), or

  • they want method B to apply or they want it to stop applying

The time limit is:

  • one year from 31 January following the year of assessment, that is one year from the normal SA filing date. For example, an election for the tax year ended 5 April 2018, would need to be made by 31 January 2020.

Rent-a-room elections may be withdrawn within the same time limits.

Election for exemption not to apply

A taxpayer may elect that the rent-a-room exemption shall not apply to him. The effect is that rent-a-room profits (or more likely, losses) are calculated in the normal way for that year, F2A92/SCH10/PARA10 (for years up to 2004-05) and ITTOIA05/S799 (for 2005-06 onwards).

  • The election has to be in writing to an officer of HMRC. No special form is required, making the appropriate entries on the return will do.

  • The election covers one year only.

  • The time limit is one year from 31 January following the year of assessment, that is one year from the normal SA filing date.

  • The election may be withdrawn within the same period.

Election for simplified calculation of profit

A taxpayer may elect to use the simplified method of calculating rent-a-room profits. The effect is that rent-a-room profits are calculated on the difference between the individual’s limit and the gross receipts for the year. See PIM4030, method B - F2A92/SCH10/PARA11 & PARA12 (for years up to 2004-05) and ITTOIA05/S800 (for 2005-06 onwards).

  • The election has to be in writing to an officer of HMRC. No special form is required. Making the appropriate entries on the return using one or other method will suffice.

  • The election continues in force for subsequent years until it is withdrawn, or until the gross receipts fall below the individual’s limit. Using the other method in a subsequent return should be treated as a withdrawal.

  • The time limit is one year from 31 January following the year of assessment, that is one year from the normal SA filing date.

  • The election may be withdrawn within the same period.

Extension of time limit

HMRC is empowered to extend the time limits in any particular case.

It will normally extend the time limits in cases involving:

  • sickness or absence abroad of the taxpayer,

  • other serious personal difficulties,

  • other situations where through no fault of the taxpayer or the taxpayer’s advisers the relevant information to reach a decision within the statutory time limit was not available.

You do not have the authority to refuse late notices without referring to BAI first.

Late notices fall into two categories:

  • those that you must submit to BAI.

  • those that you can accept without reference to BAI.

Cases to be submitted

The following categories of cases should be submitted to BAI.

  • Enquiry cases: where the late notice is made for a year covered by a Revenue enquiry.

  • Cases where a discovery assessment is made, TMA70/S43A allows the taxpayer to make or revoke an election outside the normal time limit for a year for which a non-culpable discovery assessment is made. Submit any case where it is claimed that TMA70/S43A applies.

  • Any other case where the table below does not allow you to accept a late notice or where the circumstances of the case are not covered by the table.

Where you are submitting a case to BAI you should establish why the election etc. was not made within the normal time limits and then tell the taxpayer or agent that you will give them the result of the HMRC decision when you know it.

When you can accept a late notice

The table below shows the situations where you can accept a late notice without referring it to BAI.

Reason for late notice/election Time limit for acceptance Conditions
Sickness, absence abroad or other serious personal difficulties As soon as the cause of the delay has expired None
Elections lost in the post   Evidence must be provided by the taxpayer or his agent to substantiate the contention that a notice was sent to the Revenue in time

If you have serious doubts about the evidence produced submit to BAI.

Submissions

For information on how to contact and make a submission to BAI, please see here.