Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
Internet Publications
Other Bills before Parliament

Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 1 — Rent-a-room relief
342

794
Full rent-a-room relief: income chargeable under Chapter 8 of Part 5
(1)
This section applies if the individual has any rent-a-room receipts for the tax
year which would otherwise be chargeable to income tax under Chapter 8 of
Part 5 (income not otherwise charged).
(2)
For each agreement from which those receipts arise, the amount of—
5
(a)
those receipts arising in the tax year from the agreement, less
(b)
any expenses associated with them,

is treated as nil.
Alternative calculation of profits if amount exceeds limit
795
Alternative calculation of profits: introduction
10
Sections 796 to 798 (which provide for alternative methods of calculating
profits) apply if—
(a)
an individual qualifies for rent-a-room relief for a tax year,
(b)
the individual’s total rent-a-room amount for the tax year exceeds the
individual’s limit for the tax year, and
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(c)
an election by the individual under section 800 has effect to apply the
alternative method of calculating profits for the tax year.
796
Alternative calculation of profits: trading income
(1)
This section applies if the individual has any rent-a-room receipts for the tax
year which are the receipts of a trade.
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(2)
The profits of the trade for the tax year are—
(a)
the sum of the amount of the rent-a-room receipts for the tax year
arising from the trade and the amount of any relevant balancing charge,
less
(b)
the deductible amount.
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(3)
The deductible amount—
(a)
is L if all the individual’s rent-a-room receipts for the tax year arise
from the trade, and
(b)
otherwise, is—

but, in either case, subject to a maximum of T.
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(4)
In subsection (3)—
L is the individual’s limit for the tax year,
T is the individual’s rent-a-room receipts for the tax year arising from the
trade, and
R is all the individual’s rent-a-room receipts for the tax year.
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(5)
In calculating the amount of any rent-a-room receipts for the purposes of this
section, no deduction is allowed for expenses or any other matter.

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 1 — Rent-a-room relief
343

797
Alternative calculation of profits: property income
(1)
This section applies if the individual has any rent-a-room receipts for the tax
year (“Part 3 rent-a-room receipts”) which are to be brought into account in
calculating the profits of a UK property business.
(2)
In calculating those profits for the tax year—
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(a)
the Part 3 rent-a-room receipts for the tax year are brought into account
only in calculating the profits of the business for the tax year, and
(b)
any expenses associated with those receipts are not brought into
account.
(3)
In calculating those profits for the tax year—
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(a)
a deduction is allowed, and
(b)
no relevant allowance, but any relevant balancing charge, is made.
(4)
The amount of the deduction—
(a)
is L if all the individual’s rent-a-room receipts for the tax year are Part
3 rent-a-room receipts, and
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(b)
otherwise, is—

but, in either case, subject to a maximum of P.
(5)
In subsection (4)—
L is the individual’s limit for the tax year,
P is the individual’s Part 3 rent-a-room receipts for the tax year, and
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R is all the individual’s rent-a-room receipts for the tax year.
798
Alternative calculation of profits: income chargeable under Chapter 8 of Part 5
(1)
This section applies if the individual has any rent-a-room receipts for the tax
year which are chargeable to income tax under Chapter 8 of Part 5 (income not
otherwise charged).
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(2)
The amount charged for the tax year arising from all the agreements from
which the receipts are derived is—
(a)
the amount of the receipts for the tax year so arising, less
(b)
the deductible amount.
(3)
The deductible amount is—
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subject to a maximum of I.
(4)
In subsection (3)—
L is the individual’s limit for the tax year,
I is the amount of the receipts for the tax year arising from the agreements,
and
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R is all the individual’s rent-a-room receipts for the tax year.

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 1 — Rent-a-room relief
344

(5)
In calculating the amount of any rent-a-room receipts for the purposes of this
section, no deduction is allowed for expenses or any other matter.
Elections
799
Election not to apply full relief
(1)
An individual may elect for sections 792 to 794 (full relief) not to apply.
5
(2)
The election—
(a)
must specify the tax year for which it is made, and
(b)
has effect for that year (unless withdrawn by notice given by the
individual).
(3)
An election or notice of withdrawal must be made or given to the Inland
10
Revenue on or before—
(a)
the first anniversary of the normal self-assessment filing date for the tax
year for which the election is made, or
(b)
such later date as the Inland Revenue may, in a particular case, allow.
800
Election for alternative method of calculating profits
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(1)
An individual may elect for the alternative method of calculating profits given
in sections 796 to 798 to apply if—
(a)
the individual qualifies for rent-a-room relief for a tax year, and
(b)
the individual’s total rent-a-room amount for the tax year exceeds the
individual’s limit for the tax year.
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(2)
The election—
(a)
must specify the tax year for which it is made, and
(b)
has effect for that year and subsequent tax years (unless withdrawn by
notice given by the individual).
(3)
A notice of withdrawal of an election must specify the tax year for which it is
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given.

The election ceases to have effect for that tax year and subsequent tax years.
(4)
Withdrawal of an election does not prevent a fresh election from being made
for a subsequent tax year.
(5)
An election or notice of withdrawal must be made or given to the Inland
30
Revenue on or before—
(a)
the first anniversary of the normal self-assessment filing date for the tax
year specified in the election or notice of withdrawal, or
(b)
such later date as the Inland Revenue may, in a particular case, allow.
(6)
If—
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(a)
an election would otherwise have effect for a tax year, but
(b)
the individual’s total rent-a-room amount for the tax year does not
exceed the individual’s limit for the tax year,

the individual is treated as giving a notice of withdrawal of the election which
specifies that tax year as the one for which it is given (and the election,
40
therefore, ceases to have effect for that tax year and subsequent tax years).

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 2 — Foster-care relief
345

801
Time limit on adjustment of assessment
(1)
This section applies if it is necessary to make an adjustment by way of
assessment to give effect to an election or notice of withdrawal under section
799 or 800.
(2)
The assessment is not out of time if it is made on or before the first anniversary
5
of the normal self-assessment filing date for the tax year for which the election
was made or notice was given (or treated as given).
Interpretation
802
Minor definitions
In this Chapter—
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“letting” includes a licence to occupy,
“relevant allowance”, for a tax year, means a capital allowance falling to
be made for the tax year under Part 2 of CAA 2001 in respect of plant or
machinery provided for the purposes of a trade or letting from which
rent-a-room receipts are derived, and
15
“relevant balancing charge”, for a tax year, means a balancing charge
falling to be made for the tax year under Part 2 of CAA 2001 in respect
of plant or machinery provided for the purposes of a trade or letting
from which rent-a-room receipts are derived.
Chapter 2
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Foster-care relief
Introduction
803
Overview of Chapter 2
(1)
This Chapter provides relief on income from the provision by an individual of
foster care.
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The relief is referred to in this Chapter as “foster-care relief”.
(2)
The form of relief depends on whether the individual’s total foster-care
receipts exceed the individual’s limit (see sections 807 to 811).
(3)
If they do not, the income is not charged to income tax (see sections 812 to 814).
(4)
If they do, the individual may elect for an alternative method of calculating the
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income (see sections 815 to 819).
(5)
If the foster-care receipts are the receipts of a trade, special rules apply —
(a)
if the period of account of the trade does not end on 5th April (see
sections 820 to 823), and
(b)
in relation to capital allowances (see sections 824 to 827).
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(6)
The provisions of this Chapter which are expressed to apply in relation to
trades also apply in relation to professions and vocations.