Is there Tax payable when 'subletting'

Alter_ego

I'm thinking that any contact with HMRC on the subject could start an investigation into whether the Landlord is actually declaring the rent he receives informally from you. Although I'm unsure what you mean by "Rent privately through a friend."

aldredd

Alter_ego wrote: »

I'm thinking that any contact with HMRC on the subject could start an investigation into whether the Landlord is actually declaring the rent he receives informally from you. Although I'm unsure what you mean by "Rent privately through a friend."

I believe he does - but of course can't speak on his behalf - as prior to renting to us, he did rent it out in a more formal fashion. He runs his own (separate) business, so I'm sure he's fully aware of his obligations when it comes to tax liabilities.

Regarding 'Rent privately through a friend' - it's just that. He's a friend who has a property he rents out - he currently rents it to us as he needed a new tenant, we needed a new home / a landlord who wouldn't screw us over each time the contract was up for renewal.

He meets his obligations as a landlord eg maintenance (although he hadn't fitted smoke alarms tut tut!), and we meet ours - we pay our rent in full, on time (by Standing Order). Nothing fishy going on. I just want to be able to continue having it as my UK address whilst I'm away, and get someone in there who I know & trust to look after the house & our cat - and for them to cover some of my costs in return. (Plus, I'm doing my parents HUGE favour getting him out of the family nest haha!)

I wonder... would the 'rent a room' scheme apply here? Although it wouldn't be my primary place of residence per se, it will continue to be my primary UK address (all bills, bank accounts etc registered there)

angelsmomma

If there is no written contract, deposit etc then what do you mean by he meets all landlord obligations? It is a legal requirement to protect the deposit.

I would not be too sure that he pays tax on this income at all and you need him to confirm this not just assume.

aldredd

angelsmomma wrote: »

It is a legal requirement to protect the deposit.

Correct - but there is no deposit to protect - there is no law saying there has to be one, is there?

angelsmomma wrote: »

I would not be too sure that he pays tax on this income at all and you need him to confirm this not just assume.

Correct, I shouldn't assume either way, but equally, it's not really my place to ask. Out of interest, what makes you think he's not paying his tax?

martindow

Isn't this making it all rather complicated? Could the sub-tenant not pay what you were going to charge and you pay the balance of the rent each month. You could have an understanding with the LL that if the sub-tenant does not pay you would make up what was owed.

This would avoid the need for you to declare earnings and avoid opening a can of worms with HMRC if your LL is not declaring his income.

jjlandlord

Werdnal wrote: »

Of course, you are correct - utilities, council tax etc, are the responsibility of the tenant, so if the tenant decides not make the subtenant pay them, they are not deductable.

Utilities/council tax's responsibility depends on the agreement between the LL and the tenant.

If LL pays them I believe this can be deducted from the gross rent.

aldredd

martindow wrote: »

Isn't this making it all rather complicated? Could the sub-tenant not pay what you were going to charge and you pay the balance of the rent each month. You could have an understanding with the LL that if the sub-tenant does not pay you would make up what was owed.

This would avoid the need for you to declare earnings and avoid opening a can of worms with HMRC if your LL is not declaring his income.

Thanks martindow,
yes, I think this sounds like the sensible solution, and would make everything much easier. I will speak to my LL, as this is the one he didn't really want (he wanted it all to come from me), but I'll explain the situation, and hopefully he will be happy with that!

What a mine-field eh?

aldredd

jjlandlord wrote: »

Utilities/council tax's responsibility depends on the agreement between the LL and the tenant.

If LL pays them I believe this can be deducted from the gross rent.

For ref, I am currently responsible for all bills / utilities etc - they are not included in my existing rent.

00ec25

aldredd wrote: »

I wonder... would the 'rent a room' scheme apply here? Although it wouldn't be my primary place of residence per se, it will continue to be my primary UK address (all bills, bank accounts etc registered there)

You cannot use the rent a room scheme, this only applies where you are a resident LL (the LL can be either the property owner or are themselves a tenant and they are sub letting) and the other person is therefore a lodger.

You will be overseas therefore it is not your main residence and they are not your lodger, they are your tenant. You are obliged to meet any legal requirements placed on you as a LL, although clearly at least some of these will hbe met through the actions of your own LL – the obvious exception being if you take a deposit you are liable for registering it

As regards your tax position your circumstances are covered by specific rules relating to letting a property at below market rates to a relative – see HMRC here -

Note as you are a LL, you must declare the income but you can claim costs up to the value of the cost you incur but becuase you wil be overseas you MUST operate within the non resident landlords scheme - in your case the easiest way would be to register with HMRC to receive your income gross - see HMRC here

jjlandlord

aldredd wrote: »

For ref, I am currently responsible for all bills / utilities etc - they are not included in my existing rent.

I understand that.
However, you asked about the tax implications for you to sublet and to include utilities and council tax in the rent you would charge.