Rent-a-room relief

Section 32 Finance Act 2001 implements the “rent-a-room” scheme which was announced by the Minister for Finance on Budget day. It provides that where an individual rents out a room or rooms in a “qualifying residence” and the rent received, including sums received for the supply of services such as meals and laundry, is ₤6,000 or less for a year of assessment, no tax is payable on the rent. To cater for the short tax “year” i.e. the year of assessment 2001, the limit is ₤4,440. Where more than one person is entitled to the rent the limit is divided between the persons concerned. Room rentals coming within the scope of the scheme will not affect the person’s entitlement to mortgage interest relief or the capital gains tax exemption on the disposal of a principal private residence.

Where

• in a year of assessment an individual is chargeable to tax under Case IV or Case V in respect of his or her qualifying residence, regardless of whether the sums are derived from one or more sources, and
• the amount of relevant sums does not exceed the individual’s limit for the year of assessment,

then those profits / gains or losses of that year of assessment arising in respect of all relevant sums are treated as nil. No deductions for expenses are made in ascertaining the amount of relevant sums - [subsection (2) of section 32].

The foregoing treatment does not apply for a year of assessment where an individual so elects in writing before the date that a return is due - [subsection (3) of section 32].

Subsection (4) provides that this section does not affect the obligation to make a return.

“Qualifying residence” means a residential premises in the State which is occupied by an individual as his or her principal private residence during the year of assessment.

“Residential premises” means a building / part of a building used as a dwelling.

“Relevant sums” are sums received by an individual in respect of his or her qualifying residence for the use of a room or rooms in the qualifying residence for the purpose of living accommodation. It also includes sums received for meals, cleaning, laundry and other similar goods and services which are incidentally provided in connection with that use.