Tax crackdown on hosting families

Tuesday 22 November 2016

Some Jersey families have said they feel “like criminals” after being told they will be taxed for hosting foreign students.

The Taxes Office is cracking down on Islanders who rent space in their homes to students, but who haven't properly declared the income on their tax forms - and that's left some concerned that they may face bills for thousands of pounds after not being taxed on the income for many years. The Taxes Office argues the rules are already "generous" and must be implemented.

Sid Brown, Principal at St Brelade’s College, one of the biggest English language schools in Jersey, says he can fully understand why the Tax Office wants to put a stop to untaxed earnings, but says a balance must be made.

“Some of the families I have spoken to do say they feel like criminals, which is not what anyone wants because they are providing a very valuable service to the school, to the Island and to all the students who spend time here and to help generate all the lifelong friendships that are made.”   

Mr Brown said that the UK, in contrast, has always included a provision for individuals to rent space in their home. This year it was increased to £7,500 and Mr Brown said a similar system should be introduced in Jersey.

He said: “St Brelade’s College does not in any way condone the non-declaration of income tax by any individual or business. However, we are seeking a similar tax allowance as provided in the UK in order to encourage individuals to make a positive contribution to the economy and to improve their own living standards.”

Mr Brown said there are several reasons why Jersey should follow the UK model, including reduced administration, utilising scarce bed space, supporting low income families and encouraging visitors to the Island.  

“As a local company in operation for nearly 40 years, we understand the importance of ensuring stability for the island through a dependable tax revenue stream. We therefore support progressive tax policies and uphold the importance of individuals and companies to correctly declare their income.

“However, we strongly believe that the current system for declaring income from guests is regressive and results in a negative impact on the economy. We urge policymakers to review this policy and in line with the UK, move to a more progressive and less bureaucratic system for hosts.”

Comptroller of Taxes Richard Summersgill outlined his department’s policy on hosting families.

He said: “Income from lodgers has always been taxable according to Jersey’s tax law – including paying (student) guests in a family home - and many people do already declare such income. 

“The Taxes Office operates, I think quite generous, 'income disregards' when taxing income received from lodgers in the family home – 50% of the rent received is disregarded where full board is provided. 

“This means the householder/landlord does not have to go to the trouble of keeping records and evidencing what they have actually spent on putting up the student/lodger.

“For many households, the 50% income disregard will cover the costs of having a student/lodger and they will pay tax on the 50% 'profit' element.

“People do have to declare the full income received on their tax return; and the Taxes Office will then automatically apply the income disregard.  If they wish more of the income to be disregarded they need to set out the total costs they have incurred and ensure they keep records.”

St Brelade Constable Steve Pallett said: "There is a delicate balance here. On the one hand the tax authorities have to to their job but what we don't want is hosting families to be put off, which is the very last thing we want."

Constable Steve Pallett is concerned that the new guidelines may put off families from hosting foreign students.