Budget 2018: Victory for AAT on rent-a-room relief 

Ahead of this week’s Budget, AAT (Association of Accounting Technicians) had outlined a number of key reforms for Chancellor Philip Hammond to consider. These included removing the proposed ‘shared occupancy test’, making further reforms to stamp duty, and reducing the costs SMEs have to pay when hiring an apprentice. So how did the Chancellor get on against our wish list?

Recommendation 1: Shared occupancy test for rent-a-room relief

This summer, HM Treasury proposed a new “shared occupancy test” for those renting their spare rooms to continue to qualify for the annual £7,500 rent-a-room tax relief.

This was due to be included in the 2018-2019 Finance Bill and would have brought an end to rent-a-room relief for those who rented out a single room whilst they were absent or from renting out entire properties whilst away from home.

AAT campaigned against the change which added unnecessary complexity to the tax system, had a negligible impact on tax receipts, would draw thousands of people into the tax self-assessment system and would be a “nightmare” to enforce.

The Budget review documentation published yesterday confirms that the draft legislation has been scrapped, “…to maintain the simplicity of the system.”

Phil Hall, AAT Head of Public Affairs & Public Policy, said;

AAT is delighted that HM Treasury has seen sense on this and recognised that the best solution for landlords, tenants, policymakers and the economy was to drop these plans and allow rent-a-room relief to continue as it has for over 25 years as a simple to administer, easy to understand tax relief that’s available to all.

Recommendation 2: Stamp duty reforms

The Stamp Duty subsidy for first time buyers, introduced in the 2017 Budget is costing the taxpayer £560m a year and is forecast to rise to £670m by 2021-2022.

These costs have been further increased by the Budget announcement this week, that Stamp Duty would no longer be payable by first-time buyers purchasing a shared-ownership home worth up to £500,000 – and that this will be backdated.

AAT has previously proposed an alternative solution - switching Stamp Duty liability from the buyer to the seller. This would save the taxpayer hundreds of millions of pounds whilst protecting the £9.3bn it currently raises.

Phil Hall, AAT Head of Public Affairs & Public Policy, said;

AAT has long recommended that switching Stamp Duty liability from the buyer to the seller would be a simpler, fairer, more effective system which would remove every single first-time buyer across the country from Stamp Duty liability whilst crucially also helping those already on the property ladder to move up.

Recommendation 3: Apprenticeships

News that non-apprenticeship levy payers comprised of small and medium-sized enterprises (SMEs) will now only pay a 5% contribution towards the cost of training new apprentices, rather than 10%, is a major step in the right direction.

Rob Alder, Head of Business Development, AAT said:

Since the apprenticeship levy was brought in during 2017, apprenticeship starts have fallen off a cliff, with the latest figures showing a 28% fall across all starts during 2017-18 compared to 2016-17. If apprenticeships are to work to their full potential, then small businesses have a vital role to play, and this policy could provide just the fillip they require to put apprentices at the heart of their recruitment thinking.

Other recommendations:

• AAT will continue to lobby for simplicity of ISA products, with the Chancellor making no announcements in this area, other than to confirm that the adult subscription limit will remain unchanged at £20,000 and Junior ISAs increasing to £4,368 in line with inflation
• News of a delay to off-payroll working (IR35) rules affecting the private sector are to be welcomed. There’s been no evidence the new rules have worked in the public sector to date, and the delay to April 2020 means there is the opportunity to conduct the work required to define those as taxed employees and those taxed on a self-employed basis
• AAT also welcomes the Government’s commitment to tackle single-use plastics waste with a proposed tax on plastic packaging that is less than 30% recycled. There is so much more that can be done in this area – not just by producers and the general public but by the business community too. Responsible choices should be encouraged.