Noel Ahern (Dublin North West, Fianna Fail)
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Question 76: To ask the Minister for Finance to clarify the situation regarding the rent a room scheme; the qualifying rules for same and confirm if a separate dwelling unit (details supplied), separated from main home by a few feet qualifies; and if he will make a statement on the matter. [37086/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The rent-a-room scheme was introduced in the Finance Act 2001 as an incentive to encourage individuals to let rooms in their sole or main residence. The property must be situated in the State and be occupied by the individual as his/her sole or main residence during the tax year for which the relief is claimed. Payments received under the scheme in respect of the letting of rooms and any incidental services, e.g. meals, laundry etc., are exempt from income tax, PRSI, health contributions and the income levy where the amounts received do not exceed the annual threshold, currently €10,000.

The gross payments are taken into account in establishing whether the annual threshold is exceeded, i.e. no deduction is allowed for expenses incurred in connection with the letting. Where the gross payments exceed the threshold in a particular year, the entire profits are taxable and not just the amount that exceeds the threshold.

The availability of mortgage interest relief, the capital gains tax exemption on gains arising from the disposal of an individual's principal private residence and the owner-occupier relief for property situated in a tax incentive area, such as an urban renewal scheme, are not affected by the receipt of income that is exempt from income tax under the rent-a-room scheme.

The relief does not apply where the letting is by a parent to a child or, for example, where it is between an employer and an employee.

I am informed by the Commissioners that the let room or rooms can comprise a self-contained unit within the residence, such as a basement flat or a converted garage attached to the residence. However, a self-contained unit that is adjacent to the residence, but not actually attached to it, cannot qualify for the relief.