Housing Benefit and letting to parents

DORA_THE_EXPLORER_2

Hi

Update for those who are interested.

I have been advised by a wefare rights officer that as his parents are on pension guarantee credit they get HB no matter how much capital they have .. He also said that as the property was bought in joint names his parents share would probably have a nil value, because if my partner did not want to sell his share it would be very difficult to sell 2/3 of a property.

Dora

real1314

DORA_THE_EXPLORER wrote: »

Hi

Update for those who are interested.

I have been advised by a wefare rights officer that as his parents are on pension guarantee credit they get HB no matter how much capital they have .. He also said that as the property was bought in joint names his parents share would probably have a nil value, because if my partner did not want to sell his share it would be very difficult to sell 2/3 of a property.

Dora

I don't think the Welfare Rights bod has thought this through properly.

What is your current plan of action?

If it's to start charging them rent, then you'll fall foul of the "previously owned" clauses. Alternatively the council could also deem it to be an arrangement created to take advantage of the HB system and refuse on that basis. Getting Pension Credit Guarantee element would not preclude these decisions as these are about liability for rent (which is a HB decision) rather than the calculation of an award (which is not a HB decision if Pension credit is in payment).
If it's for them to move out, then I suspect this would trigger a review of the Pension Credit award which could then invoke the issue of disposal of the property (/capital asset) for both HB and Pension Credit.

amt27

sorry to hijack this thread,

i have a similar situation, parents bought grandparents house over 5 years ago, but do not collect any rent, they did initially but didn't bother after a couple of months,

does the fact that the house was bought with a buy to lett mortgage make a lot of difference?

thanks

seven-day-weekend

Does it make a lot of difference to what?

amt27

seven-day-weekend wrote: »

Does it make a lot of difference to what?

whether or not the claim is deemed to be contrived

Oldernotwiser

What rent?

seven-day-weekend

I suppose the fact that it was bought on a BTL mortgage shows that they at least intended to collect rent, even if they have not done so.

I think you might need other evidence also. When my son successfully claimed HB for a flat I owned, I was able to prove not only an intention to let, but demonstrate that it had been advertised on the open market (and thereby showing that I had not bought the place just to provide him with a home) before my son moved in.

All you can do is tell the truth, you may be successful.

LizzieS_2

DORA_THE_EXPLORER wrote: »

Hi

Update for those who are interested.

I have been advised by a wefare rights officer that as his parents are on pension guarantee credit they get HB no matter how much capital they have .. He also said that as the property was bought in joint names his parents share would probably have a nil value, because if my partner did not want to sell his share it would be very difficult to sell 2/3 of a property.

Dora

What a mess, I think you need a solicitor for this one. Hopefully others can chip in with more detail. I did do a lot of research on this topic a few years ago, but my memory is a little sketchy now.

The welfare officer is partially correct. Whilstever the parents remain in the property they are entitled to HB as they are in receipt of Pensions Credit (Pensions credit ignore capital invested in the resident property), however, that in itself does not allow HB to be paid where the property is owned by a family member. If they move, it is more complicated as they could be deemed to have the full capital value of the house (see later) which would possibly reduce their Pensions Credit allowance to nil (assets over £6000 reduce the amount payable) which in turn would also affect entitlement to HB (ie capital exceeds £16000).

Your partner was technically the beneficial owner of the property from day 1 and he was made into legal owner 3 years later (earliest date council houses could be sold). The concept was to allow your partner to buy the property under false pretences (ie he did not have the right to buy at the same reduced rate himself) – only mentioning this because it could cause you problems later by a forced confession at trying to wriggle out of the mess.[/font]
When the house was transferred it could have been done in 2 ways (there’s more but these are the most obvious) for inheritance tax purposes:
1) Outright gift, ie there was no right of occupation for life etc
2) Gift with reservation of benefit, ie there was a right of free occupation

Under 1) By giving the property away (bear in mind it may not be wise to admit what really happened over the purchase) they could be deemed intentionally homeless by the council, as they had the legal right to ensure permanent occupation. The fact that they were receiving HB before the purchase does indicate in itself that the purchase was not for their benefit.

Under 2) With right of occupation, it is for the owner (not council) to rehouse them. Also the ‘capital’ is technically still subject to Inheritance tax and therefore forms part of the estate, so if they move that capital will still count as being theirs (I think)

The Finance Act 2004 also made further complications under 1) – If something was gifted away then the donor (parents) is liable for income tax for the benefit they receive (ie market value of rent). Not 100% sure whether the benefit is classed as the market rent or 5% of the value of the property per year. It was aimed at catching the rich who try avoiding Inheritance Tax, but unfortunately it traps everyone else too, ie tax is payable even if the income is not there – when HB cannot pay too it makes it worse as many of the other benefits are also taxable income (total can therefore mean tax must be paid). Does not apply under 2) as the asset still forms part of the estate. I did recall reading sometime ago that if you choose to rent a property out (meaning your partner) at less than market value to a relative then you are still liable for personal income tax on the rent that should be paid under the market rates (long time since I looked into it myself and I have a feeling there are 2 schemes and you can use capital gains – mortgage as one of them meaning the tax is nil).

One of the conditions in council buy's is that irrespective of the number of years past or mortgage made, the council will only buy back at the amount the house was purcahsed for originally.

1sue23

seven-day-weekend wrote: »

Sorry real but you are wrong. My son was able to get HB when he lived in our investment flat because we were able to prove the above criteria.

If we'd have lived in the house also he would not have been able to get it. We lived elsewhere.

I understand this to be the case with the OP.

I rent to my daughter and my daughter gets housing benefit ,but I had to prove by way of rent book that it was not a contrived tenancy .

kilmacurrane

hi all,im new here.im wondering if anyone has any advice for me.
i live abroad ,and have come back purley to buy a house (no mortgage) to rent out,giving me an income abroad.My daughter wants to stay here,shes been accepted for college and has a boyfriend here.if i rent the house to her can she claim housing benefit?if so what do we need to provide in terms of proof that its not a scam?