Income Tax (Trading and Other Income) Act 2005 section 798

Alternative calculation of profits: income chargeable under Chapter 8 of Part 5

Section 798 explains how to calculate the taxable profit from rent-a-room receipts when that income falls within the category of miscellaneous income (income not otherwise charged) and the individual has elected for the alternative method of calculation rather than full exemption.

• Where rent-a-room receipts are taxed as miscellaneous income, the taxable amount is the gross receipts less a deductible amount
• The deductible amount is calculated by apportioning the individual's rent-a-room limit between miscellaneous income receipts and any other rent-a-room receipts, using the formula: limit × miscellaneous receipts ÷ total rent-a-room receipts
• The deductible amount cannot exceed the actual miscellaneous income receipts from the relevant agreements
• No deduction for expenses or any other matter is permitted when calculating rent-a-room receipts under this section