Income Tax (Trading and Other Income) Act 2005 section 783BM

Exclusion from relief: expenses deducted against rent-a-room receipts

Section 783BM prevents an individual from claiming the property allowance in a tax year where they qualify for rent-a-room relief but have chosen instead to deduct actual expenses against their rent-a-room receipts.

• The property allowance is not available to an individual who qualifies for rent-a-room relief and has rent-a-room receipts that would otherwise form part of their property business profits.
• Where rent-a-room receipts are within the rent-a-room limit but the individual has elected to disapply full rent-a-room relief (so as to deduct actual expenses instead), the property allowance is blocked.
• Where rent-a-room receipts exceed the rent-a-room limit and the individual has not elected for the alternative method of calculating profits (meaning they default to deducting actual expenses), the property allowance is also blocked.
• The purpose of this rule is to prevent an individual from benefiting from the property allowance while simultaneously deducting actual expenses in calculating their property business profits.