The Association of Taxation Technicians, of which I am a Member, has issued their commentary to the Government on the draft legislation regarding the abolition of letting relief for most people.
A valid point is raised in the commentary that the Statement of Practice (SP14/80) is now forty years old and the question of whether it is still fit for purpose should be raised. This statement allows those, who meet the conditions, to claim Private Residence Relief (PRR) rather than letting relief. However, the wording of the document, as pointed out by the ATT, does not reflect modern ways of letting and therefore those with two lodgers, for example, are not covered. This could mean that for those letting their homes to more than one lodger they could have to notify within 30 days of selling their property and calculate and pay any capital gains.
This doesn’t seem to sit well with the government’s aim to promote shared housing and lodging.
The ATT also raised concerns over the ‘cliff edge’ that will occur on 6th April 2020, stating that with an individual selling a property on that date, rather than on the day before, …”could be up to £11,200 worse off overnight”. They would also get just 30 days to report, whereas if they had sold the day before, they would have until 31st January 2021. I have spoken on this subject already as this seems extremely unfair. Surely a better solution would be to freeze letting relief which would have been allowed up to 5th April 2020? Failing that, a phased introduction or ‘stepping down’ of the relief would seem a fairer way to proceed.
It is proposed in the draft legislation that letting relief will only be available in the future for landlords that share their home. If the landlord moves out, lettings relief will not be applicable.
However, the draft legislation also mentions that the shared accommodation must be let out as residential accommodation “otherwise than in the course of a trade or business”. This could mean that those offering bed and breakfast, or an arrangement such as AirBnB, could lose their entitlement to letting relief, even though it is still shared accommodation. This must surely be a concern for the 223,000 individuals offering accommodation through AirBNB. The point is also raised that having more than one lodger, even if in shared accommodation, could also remove the entitlement to letting relief.
Another important point raised regarding the Statement of Practice is that this entitles those sharing accommodation and providing meals to PRR. However, this practice is becoming less popular, with most lodgers using shared kitchen facilities and making their own meals. Currently, this takes them out of the protection of PRR. With Spareroom, the popular site for those advertising or looking for rooms with a private landlord, stating that they have over 2 million visitors every month, this could hit a lot of people. People, that ATT have also pointed out, may not be represented or familiar with the law.
We will have to wait to see what happens with the draft legislation, but I hope that the government takes note of the very real concerns raised by the ATT. If it does not, I fear that more landlords will choose not to let out either whole properties or rooms and we could see a housing crisis on our hands.