IOM Consults On Room Rental Tax Incentives

by Jason Gorringe, Tax-News.com, London

16 September 2011

The Isle of Man government is proposing to introduce tax advantages for taxpayers who rent out a room within their home, similar to schemes already in place in the United Kingdom and Ireland.

According to the government's consultation document, the Isle of Man is proposing that an individual will be able to receive tax-free income of up to GBP1,500 per year from letting one or more rooms in their own home to private tenants for residential purposes.

Similarly, a married couple or civil partners who are jointly assessed for tax will be able to receive tax-free income of up to GBP3,000 per year. These figures refer to gross income received before the payment of any expenses. If the letting income exceeds these limits, the amount above the specified maximum will be subject to income tax in the normal way

To be eligible for the scheme, it is proposed that an individual or couple must:

• Be resident in the Isle of Man;
• Own the home of which the room, or rooms, form a part; and
• Live in the home at the same time as any lodger, however certain conditions surrouding absence are proposed to apply.

The accommodation being let can be in either a house or a flat. In addition:

• The property must be in the Isle of Man;
• The property must be the only or family home of the individual or couple who own it;
• The accommodation being let must be furnished; and;
• The accommodation must be let for residential use only and not for use as office or storage space.

According to the consultation document, it is proposed that if the individual or couple own more than one property, the scheme will only apply to letting income from the home in which they live. In addition, if an individual or couple sell their home during the year and buy another, they can claim relief for letting income from each home. However, the total annual tax-free income limits will still apply.

Lastly, it is proposed that relief will not be granted to letting income received:

• From a property where a hotel or guesthouse trade is conducted;
• From the regular provision of accommodation to occasional visitors for short periods, which would result in the property being guest accommodation rather than a home;
• by individuals or couples living in private rented accommodation;
• By individuals or couples living in public sector accommodation;
• From self-contained accommodation in which all rooms (including kitchen, bathroom and toilet) are accessed via a single door which only the tenant can use;
• Under the Isle of Man Homestay Scheme during the Isle of Man TT, the Manx Grand Prix or any other event that may be included from time to time under the Homestay Scheme (the current tax free limit of GBP1,500 for the Isle of Man TT will still apply); or;
• If expenses incurred in the letting have been claimed under section 58 of the Income Tax Act 1970 (relief on rental income).

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