Pannells admits rent advice error

Potential abuse of the Rent A Room tax break scheme has been stamped out by the Inland Revenue.

The Revenue added a clarifying sentence to this year’s tax returns explaining that the tax break was only aimed at domestic properties.

Advice from accountancy firms, including Pannell Kerr Forster’s Guildford office, soon after the scheme’s launch in 1993, suggested employers could benefit from it. Pannells argued accommodation could be used as a cheap alternative for storing books or computer equipment.

Pannells admitted its mistake this week. Senior manager in its Guildford tax department, David Marshall, told Accountancy Age: ‘I think the advice was probably premature. We certainly wouldn’t give that advice now.

‘This sort of information is pushed out on the basis of no responsibility.

Any further action should not be taken without referral,’ he added.

A Revenue spokesman said: ‘We don’t regard Rent A Room as a tax dodge, and our leaflets explain very clearly that it is a domestic arrangement.

‘We added the sentence after changes to the income from property rules as a means of clarification.’