Universal credit & equity

real1314

MissMoneypenny wrote: »

That's a bit uncalled for. zagfles has a good knowledge of tax credits and nobody really knows exactly what the changes will be in UC until the welfare bill is passed and the new booklet published.

Tax credits do not consider the value of capital, so knowledge of Tax Credits doesn't really give them any knowledge to base their opinion on.

That's your guess, but nobody knows yet.


Means tested DWP (IS, JSA(IB), Pension Credit) and Local Authority (HB and CTB) Benefits do deal with capital issues.
Knowledge of those benefits, and the way capital assets are assessed under those rules, are what my post is based on.

One thing the government have made clear; those who have capital and investments, will not be able to claim income based welfare payments anymore.

Are you suggesting that people with £1 of capital will not get UC? Or that there will be a limit (e.g £16k)?

They will still need rules to determine the value of assets. Those rules will almost certainly still allow a mortgage (which has a legal status against an asset) to be subtracted from the value of an asset. :cool:

HappyMJ

real1314 wrote: »

Are you able to provide a link to regulations regarding the bold section?

'cos it looks to me like you've just made it all up. :cool:

Incidentally OP, even a half share in a property can be sold. However the value would be affected. Similarly, any valuation of a property for benefit purposes would be affected to the same degree.

If you inherit a property for free take out a mortgage spend the money then the HMRC or the council or whoever you are claiming benefit from will not allow the interest expense as a deduction. Any rent received will have to be used to live on rather than paying off a debt. Lots of different regulations to do with lots of different benefits. For example a remortager who takes out an extra £10,000 will not get the interest on that part paid if they were to go onto income support and get the mortgage interest help they need as that was not used to buy the house. Only the orginal mortgage will qualify for help.

MissMoneypenny

real1314 wrote: »

Are you suggesting that people with £1 of capital will not get UC? Or that there will be a limit (e.g £16k)?

The government have said that the limit for UC will be 16k.

real1314 wrote: »

They will still need rules to determine the value of assets. Those rules will almost certainly still allow a mortgage (which has a legal status against an asset) to be subtracted from the value of an asset. :cool:

See post 30 from HappyMJ.

zagfles

real1314 wrote: »

Erm, like the first bit, the second bit is just a guess too isn't it?

Erm, yes, The phrases "I'm not even sure" and "probably" give it away. Nobody knows yet how UC will work, not even the govt

MissMoneypenny

HappyMJ wrote: »

If you inherit a property for free take out a mortgage spend the money then the HMRC or the council or whoever you are claiming benefit from will not allow the interest expense as a deduction. Any rent received will have to be used to live on rather than paying off a debt. Lots of different regulations to do with lots of different benefits. For example a remortager who takes out an extra £10,000 will not get the interest on that part paid if they were to go onto income support and get the mortgage interest help they need as that was not used to buy the house. Only the orginal mortgage will qualify for help.

I read on here that someone who used credit cards to reduce their flexable (?) mortgage to nearly 0 and then repaid their credit card from their mortgage account when the credit card started to attract interest, was unable to get SMI on the full amount of their mortgage. I assume this was because of what you have just said above?

real1314

HappyMJ wrote: »

You need to read the HMRC rules on deduction of mortgage interest. Only the interest on the mortgage taken out to buy the investment property can be deducted against the rent received on the property. The OP has said that they inherited the property mortgaged the property for much more than her share is worth and spent the money. They never said the money was spent to buy the house or to make repairs or improvements to the property the HMRC will not allow that as a deduction and the full rent will count as income. No interest can be deducted. As that is now counted as income the universal credit will be reduced.

Are you experienced in dealing with the rules on taxation of income from property? I'd suspect not.
The rules on the deduction of mortgage interest do not affect the assesment of the valuation of an asset.
However, you can in fact claim the cost of the interest on a property from an income tax perspective.

I think you've drifted to Mortgage Interest Payments for benefits like Income Support, which do have such a stipulation.

You're mixing up multiple issues here and losing the point of the issue, although the inherent issue of whether the property is treated as a capital asset, in which case income is completely disregarded and only the net value is considered;
or as an income (potentially from self-employment), in which case the value of the asset may be ignored, but the income, after allowable expenses (which would include the mortgage interest) would be taken into account.

The cash received from the mortgage and subsequently spent would in the first case (where the issue is treated as a capital asset) be simply spending of capital. This would be nominally considered against depreciation rules, but there would be no real problem for the OP;
And in the second case (where the issue is treated as income) it would potentially be repayment of shareholders capital from a "business".

I'd suspect the issue will be treated as a capital asset. See my post about valuation of a half share. Value the half share, based on what a a suitable buyer might pay for a half share, with all the inherent risks; then take off 10% for sale costs; then take off any mortgage = Zilch
:cool:

zagfles

Lotso wrote: »

So in my case I may or may not be protected?
If they don't start moving people over untill 2014 then can my sister "buy" the property from me for 100k so only just paying of the mortgage, then I will still be entitled to wtc & ctc? As long as the sale goes through in the next 2 years?

It could be seen as deprivation of capital if you do it too near the time. If you do it now I doubt it would.

HappyMJ

MissMoneypenny wrote: »

I read on here that someone who used credit cards to reduce their flexable (?) mortgage to nearly 0 and then repaid their credit card from their mortgage account when the credit card started to attract interest, was unable to get SMI on the full amount of their mortgage. I assume this was because of what you have just said above?

I did exactly that with my One Account and can never get any help with mortgage interest. Luckily it isn't much and as it's flexible it's just capitalizing onto the mortgage balance. I just cycle a bit of money around some accounts to make it look OK to the bank. To them it looks like I deposit £3,000 every month even though it's the same money going to each of the Halifax Reward accounts and back again.

real1314

HappyMJ wrote: »

If you inherit a property for free take out a mortgage spend the money then the HMRC or the council or whoever you are claiming benefit from will not allow the interest expense as a deduction. Any rent received will have to be used to live on rather than paying off a debt. Lots of different regulations to do with lots of different benefits. For example a remortager who takes out an extra £10,000 will not get the interest on that part paid if they were to go onto income support and get the mortgage interest help they need as that was not used to buy the house. Only the orginal mortgage will qualify for help.

HMRC would allow the interest as a deduction for income tax purposes. Equally they would allow it as a reasonable expense for Tax Credits.

HB or CTB would allow it, assuming they were ignoring the property as a capital asset (all income from capital assets is ignored); in which case they would be considering the property as a form of business, and in the case of a business they would allow the interest.

As I said, you are mixing yourself up with the rules for Mortgage Interest for benefits like Income Support, hence why you've used that as an example. The same rules do not apply to the situation that is presented here. You have proved that you are guessing.

If you have worked on Income Support (if that is where you have acquired the knowledge you are regurgitating) have a think about self-employed cases, that might help you see where you are going wrong.

If you haven't, then you're probably just regurgitating amateur interpretations of what you've previously read on here.
:cool:

real1314

MissMoneypenny wrote: »

I read on here that someone who used credit cards to reduce their flexable (?) mortgage to nearly 0 and then repaid their credit card from their mortgage account when the credit card started to attract interest, was unable to get SMI on the full amount of their mortgage. I assume this was because of what you have just said above?

But it's nothing to do with SMI.

The OP is not asking to claim any payment towards the interest. HappyMJ has diverted to SMI even though it's irrelevant. They are now continuing to drag the thread off topic to justify their incorrect assertion.:cool: