What are the tax implications on rent home to parents

money_issues

The sale of the property was before 5th April 2008. (march 2007)

silvercar

A sale in March 2007 should have been included in your tax return for 2006-07 and the tax paid by January 31, 2008.

It is always better to face upto it as soon as you can, sort the matter out and then move on. There may be penalites for late filing, but the revenue should be sympathetic to you coming forward and sorting it out.

If you want to estimate the liability yourself, this should be a help:

http://www.hmrc.gov.uk/worksheets/2007/sa108-notes.pdf

If you want some help with the calculation you will need to post some figures.

money_issues

Thanks Silvercar. What do you need to know in connection with figures?
Tell exactly what you need and I will give you it to the best of my knowledge.
This is new to me and wasnt away of the tax implications involved.

silvercar

month & year you "bought" the home, market value at this time & price you "paid". (just in case it is the price you paid not market value).

month & year you moved out of the home.

sale price in March 2007.

The size of the mortgage doesn't matter.

If you posted this on the tax board, there are some CGT experts on there, including an ex tax inspector. So you may get advice in dealing with the situation, also increases the chance of someone checking calculations as the old rules where complex.

One thought, if either of your parents were over 65, or over 55 and infirm (enough to render them incabable of working again) by March 1988 and you bought it before March 1988, then they would class as dependent relatives and there would be no CGT. Just an off chance you could qualify.

money_issues

Hi Silvercar

Bought the house for £39,000 and it was market value at time. Bought in 1999 around March time

Moved out of home Jan 2001

Sold property for £149,950

Renovatio

Like i said in my 1st post, i would be more concerned with your parents benefit claims:
I live with other family members - can I claim housing benefit?

If you live with a close relative, you won't be able to get housing benefit, even if you are paying them rent. A close relative is a:

• husband or wife
• civil partner
• partner
• parent or stepparent
• father-in-law or mother-in-law
• child or step-child
• son-in-law or daughter-in-law
• brother or sister
• brother-in-law or sister-in-law
• partner of any of the above

In addition, you won't be able to get housing benefit if you or your partner are responsible for a child and your landlord is a parent of that child.
They may be in line for some serious problems, how long were they getting the benefit?

money_issues

Renovatio. They didnt claim house benefit until I moved out of the property

Renovatio

sorry, i forgot to add this bit as well:

I live in a property owned by a family member - can I claim housing benefit?

If you live in a property owned by a family member and pay them rent, you may be entitled to housing benefit. However, there are a couple of things the housing benefit department will want to check. Firstly, they'll want to be satisfied that you're paying rent on a commercial basis. In other words, they'll want to know that it's a proper tenancy, not just an informal arrangement between family.
Bear in mind that if you rent from your partner, you won't be able to claim housing benefit, even if your tenancy is set up on a commercial basis. This is a new rule introduced in October 2007.
Secondly they may want to check that the arrangement has not been set up in order to take advantage of the housing benefit system - this is called a 'contrived tenancy'. For example, if your landlord only asks you to pay rent when you are not working (and so eligible for housing benefit) but not when you are working (and earning too much to claim housing benefit), this would be a contrived tenancy.

money_issues

Renovatio. No as it went to an apply board as that is what the House benefit thought and they issued them with the housing benefit.It was not in anyway to obtain monies by fraud.
My issues is with the CGT

silvercar

Sale proceeds = 150k
original cost = 39k
sale costs (estate agent, legal etc) = 3k (guessing)
net gain = 108k
PPR relief ( months you lived there + 36 out of total) = (22+36)/96= 0.6*108=65.25k
lettings relief=22/96*108=24.75
total relief=90k
chargeable gain before taper=18k
tapered gain (8 yrs ownership)=70% of 18k=12.6k
Annual allowance=8.8k
chargeable to tax=12.6-8.8=£3,800.

This would be added to your income for that year and charged at your marginal rate. So at 22% tax payer it would be £836.

Note: lettings relief is complicated, its the minimum of 40k, the PPR relief and relief for the time it was let.

Thank goodness you lived in it for a time once you took ownership; otherwise you would have had no PPR relief and no letting releif, the bill would have been much higher. You will also get charged interest on late payment and possibly late filing penalties.

I'm only one bod posting on an internet forum. At the very least I would post this on the tax board, to get further opinions:)

Hope this sets your mind at ease, it could have been a whole lot worse.