Sublet to a lodger who wants to claim housing benefit...

GreenSheep

Hello

I rent a house with my girlfriend and we sublet a room to a lodger.
He has recently lost his job and has just asked me to write him a letter explaining how much he pays in rent so he can use it for proof for the housing benefit.

My concerns are…

Firstly, I charge him £380 a month (which is a bargain for the standard of house, location and full use to be honest!) but £310 a year over the Rent-a-Room scheme limits.
He has only been with us since November and we did not have a lodger before this so the 09/10 tax year should be below the limit. Is it fair to assume the limit of £4250 is for the year and not calculated monthly so I will be under the limit?
I have no plans to put his rent up and hope the Rent-a-Room scheme increases its limits for 10/11 to swallow the £310.
We make no money from him and still a massive amount more for the house than him.
Can I justify the extra £310 a year (or £25ish a month) on extras…
I don’t provide meals or laundry but provide all consumables (cleaning products, loo rolls, tin foil, kitchen roll, etc) as well as full use of broadband and cable TV (soon). He also stores a lot of junk in the garage. I pay TV licence, etc.
Any advice? Should I even be concerned? The housing benefits are looking into his circumstances not mine right?

Secondly, because of the nature of my job I’m never sure how long I will live somewhere. I tend to stay in an area for 3/4 years and then move. Because of this I have never really settled into getting post to an address and still get it all sent to my Mum’s house.
On paper I still live at home with Mum!
Other than a Virgin Media bill I pay everything through my landlord so I don’t have any proof I even live there. I actually don’t even have a tenancy agreement myself with the landlord. It is all trust and favours – he tells be each quarter what I owe him for bills and I pay him.
So can I write him a letter? My landlord is not going to be keen to help - although he does know I sublet and is happy about that.

Any advice would be great.

I really want to write him a letter and help him out because I’ve grown to quite like him.
But I have to look after myself. I’ve already been flexible enough with rent since his loss of job.
He is too settled in to move. For starters he has the garage filled with his junk (I doubt another lodgings will come with a lockup for free) and the location is worth a fortune in transport alone. But if it gets too complicated I might just have to pull the trigger and I’m sure he could do without that at the moment.

Cheers, GreenSheep

neas

Do you have consent to sublet from landlord? (most contracts forbid you to sublet) - this would negatively affect you if he is going down HB route as you would no longer be 'hidden'.

Im unsure what the rent you charge him and the rent-a-room scheme has to do with council benefit. if you are 300 quid over rent a room scheme then you have to pay tax on the 300 quid (not a great deal over a year). Rent a Room scheme doesnt let you 'offset' utilities.. the rent a room scheme is there so people dont have to bother offsetting EARNED INCOME (thats what it is) against the cost to work out profit.

I.e. you dont have to use rent a room scheme you could basically say:

Rent payed = £350
Half of Rent you pay = £XXX
Half of Utilities (Water, Gas,Elec, Council Tax etc) = £XX

Take the XX from the rent payed... and thats your notional profit. You'd pay tax on profit. By going down this route you can offset Sky, cable, tv licence, water,gas (or a share of it) against the income you get.. to work out the profit you make off lodger.

Rent a Room scheme is just easier as its no sums involved.

Jowo_2

You do make money from him?! You are £380 better off per month from his presence! The rent a room tax threshold is an annual limit. If you do exceed it in future and you are a standard tax payer, your tax exposure on £310 will be around £70.

You are not permitted to deduct any expenses whatsover under the rent a room scheme.

If you accept rent from the lodger, you are their landlord.

Are you on the electoral register at your mothers? The potential problem with not be open about your actual residential address is potential conflicts when you try to go for credit and the addresses you give for where you reside don't match up with the address you give as an account holder.

Noone forced you to accept lower than market rent for the property, nor give consent to allowing the lodger to store their belongings in another room. Raise the rent and/or ask the lodger to put his stuff into his bedroom or pay for offsite storage.

To end the lodger agreement, simply serve reasonable notice which you should give in writing and keep a copy. If paid monthly, a months notice seems reasonable to me but do check the position first.

Best thing is never to feel pity - this is a commercial relationship and pity-lets rarely work out, neither does letting out a room to someone just to make ends meet since the money is needed but their presence gets resented.

Landlordzone is a good site for info on how the rent a room scheme operates. You are strongly recommended to have a lodgers agreement in future to prevent disputes.

Fire_Fox

Have you registered with the rent-a-room scheme? I had understood you had to do this in advance and you could only claim the discount for letting a room in your OWN home. If you are not an official resident then I don't see how you are going to be able to claim you are a resident landlord if the Inland Revenue make any investigations - who pays the council tax, you should be registered?

Are you also registered to vote (a legal requirement) or your drivers license at the correct address (another legal requirement)? Do you have contents insurance that covers the fact you have given a key to someone who isn't of your household? Are you confident you aren't breaching the terms and conditions of any financial products (currrent accounts/ loans/ credit card) by not giving your correct address?

Seems to me you are trying to have your cake and eat it: if you want to taken advantage of legal loopholes such as the rent-a-room scheme then you need to be all above board and professional about it. You don't have an AST or a lodger agreement, you cannot prove either yourself or your lodger is a genuine tenant/ resident. Not changing your address on stuff when you are somewhere a few years is just lazy - there are websites that will do most of the work for you!! I think you are putting yourself at risk of accusations of fraud and your lodger at risk of having his claim refused. Ditto your landlord - my guess is he isn't declaring the income to the IR either, hence all the bills are in hos name and there is no AST.

Jowo_2

Info here

http://www.hmrc.gov.uk/individuals/tmarent-a-room-scheme.shtml

neas

yes the landlords building insurance could be negated by it being sublet... landlord has a contract with you.. but not the other tenant...

PasturesNew

Just get yourself a rent book (from the Post Office), fill it in for the dates since he started.... I'd do it using 2-3 different pens, taking a day to fill it out so it all looks different. Then write him a letter offering him the room and dated the date he started with you. That should be enough for him to claim housing benefit.

They might want to know what's included/what's not included in his rent, which could be covered in the letter.

The Rent a Room tax free allowance is per tax year.

tbs624

neas wrote: »

Do you have consent to sublet from landlord? (most contracts forbid you to sublet) - this would negatively affect you if he is going down HB route as you would no longer be 'hidden'.

GreenSheep wrote: »

My landlord is not going to be keen to help - although he does know I sublet and is happy about that.

Greensheep - you also say

GreenSheep wrote: »

Other than a Virgin Media bill I pay everything through my landlord so I don’t have any proof I even live there. I actually don’t even have a tenancy agreement myself with the landlord. It is all trust and favours – he tells be each quarter what I owe him for bills and I pay him.

Now this one looks interesting........you do have a tenancy agreement, regardless of the lack of paperwork - you have occupation of the property, you pay rent plus bills to your LL.

Now, your LL - does he own the property outright or is it subject to a mortgage? Buy to Let or a residential one? If residential, has he sought consent to let? Sounds like yet another "let's keep it under the radar" LL. Does he declare to HMRC? Does he have gas safety checks done & provide you with a certificate? Does he have LL insurances? The fact that he has all the bills in his name suggests an air of dodginess - do his mortgage statements (if any) come to the property?