Rent-A-Room Relief: EY Summary of Technical Position
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Section 216A of the Taxes Consolidation Act 1997 (“TCA 97”) sets out the conditions for availing of rent-a-room relief from income tax for ‘relevant sums’ of up to €12,000 per annum. The definition of ‘relevant sums’ limits relief to sums received from rooms rented out for the purposes of ‘residential accommodation’.
As the term ‘residential accommodation’ is not defined in TCA 97, it should take its ordinary meaning. Dictionary1 definitions of ‘residential’ and ‘accommodation’ do not refer (either explicitly or implicitly) to a minimum period of occupation for accommodation to come within the parameters of being ‘residential’.
Although there do not appear to be any Irish court cases which consider the definition or application of the term ‘residential accommodation’, there are a number of English court cases which deal with this point.
In the judgement in the case of Owen v Elliott (H M Inspector of Taxes)2, it was stated that “the expression ‘residential accommodation’ does not directly or by association mean premises likely to be occupied as a home. It means living accommodation, by contrast, for example, with office accommodation. I regard as wholly artificial attempts to distinguish between a letting by the owner and a letting to the occupant; and between letting to a lodger and letting to a guest in a board house; and between a letting that is likely to be used by the occupant as his home and one that is not.” Leggatt L.J. further stated that “...it is accepted on behalf of the Crown that the length of the letting is not to be determinative”.
A number of similarities can be seen in the conditions for Irish rent-a-room relief and UK relief from capital gains tax (addressed in Owen v Elliott). In particular, Irish rent-a-room relief applies to all sums arising in respect of the use for the purposes of ‘residential accommodation’, of a room or rooms in a qualifying residence while relief from UK capital gains tax applies to any individual where the dwelling-house in question or any part of it is or has at any time in his period of ownership been wholly or partly let by him as ‘residential accommodation’. As such, the meaning of ‘residential accommodation’ that was deduced in Owen v Elliott should apply for the purposes of Irish rent-a-room relief.
The English cases of Westbrook Dolphin Square Ltd v Friends Life Ltd3 and Urdd Gobatih Cymru v Customs and Excise Comrs4 are also informative and in agreement with our view on the construction of the meaning of the term ‘residential accommodation’ for this purpose.
In summary, in contrast to the position taken in Revenue’s guidance on rent-a-room relief5, Section 216A TCA 97 does not make any distinction on the basis of temporal duration of the ‘use’ nor does it make any distinction between ‘guest accommodation’ and ‘residential accommodation’.
On the basis of the above, it is EY’s view that the term ‘residential accommodation’ in this context should include short-term lettings by Airbnb Ireland’s hosts of a room or rooms in their sole or main residence, and, on this basis, where the relevant conditions are met, rent-a-room relief should be available to Airbnb Ireland’s hosts. EY’s view is supported by the opinion of Senior Counsel.
1Oxford University Press. 2015. Oxford Dictionaries Oxford University Press. 2015. Oxford Dictionaries. [ONLINE] Available at http://www.oxforddictionaries.com/definition/english/residential and http://www.oxforddictionaries.com/definition/english/accommodation#accommodation__2. [Accessed 03 June 15].
2Reported (ChD)[1989 1 WLR 162; [1989 STC 44. (CA)  Ch 786;  STC 469.
3 (No. 2)  EWHC 2433 (Ch),  1 WLR 1713.
4 V&DR 273.
5 As amended by eBrief No. 21/15.