Moving House

BigAunty

I've seen information that suggests that a tenancy between relatives should be run on a commercial basis, but not one which provides any evidence that it should be at market rent.

Therefore, I wonder whether the 'commercial' aspect of the tenancy is about being businesslike in organising it - having a written tenancy agreement and so forth rather than the landlord charging the maximum LHA possible.

Happy if someone can unearth evidence to the contrary.

Firefox1975

I am guessing that HB is capped then?

otherwise her dad could charge her a pound - therefore there would be no tax to handover at the end of the quarter and the OP could keep the HB for other things?

Nah - i can't see that going through. Surely HB is purely for HB and nothing else?!?

Who will be paying Dads rent on his new flat? he isn;t on benefits is he?

emsywoo123

Firefox1975 wrote: »

I am guessing that HB is capped then?

otherwise her dad could charge her a pound - therefore there would be no tax to handover at the end of the quarter and the OP could keep the HB for other things?

Nah - i can't see that going through. Surely HB is purely for HB and nothing else?!?

Who will be paying Dads rent on his new flat? he isn;t on benefits is he?

I have no idea what you are on about?

By HB I assume you mean LHA?

Firefox1975

OP - is your father planning on renting or buying somewhere else?

Your father will end up with a tax bill every quarter on the rent you hand over (even if you do not physically "pay" the market rent - it will be calculated for your father as if you did)

if your father uses your HB money to rent somewhere else it seems like a contrived tenancy. they have effectively released the capital/useage of the home back to you at no cost to you (because you receive HB) and no cost to themselves (because they use your HB money to rent somewhere else)

BigAunty

Firefox1975 wrote: »

..

Your father will end up with a tax bill every quarter on the rent you hand over (even if you do not physically "pay" the market rent - it will be calculated for your father as if you did)

Wrong on many counts.

The HMRC will tax the father on the income less allowable business expenses, such as the interest part of the mortgage, repairs, the wear and tear allowance and similar. No profits = no tax to pay.

Tax is paid through an annual return, not quarterly.

He will not pay tax on a notional rent set by LHA/housing benefit rates but on actual income. The HMRC do not tax imaginary/notional profits but actual ones (actual turnover .

He may have to consider capital gains tax (see the HMRC website) if he sells in future.

Firefox1975 wrote: »

...

if your father uses your HB money to rent somewhere else it seems like a contrived tenancy. they have effectively released the capital/useage of the home back to you at no cost to you (because you receive HB) and no cost to themselves (because they use your HB money to rent somewhere else)

Wrong on so many counts.

The term 'contrived tenancy' applies solely to when the DWP determine that a tenancy between close relatives has been set up to exploit the HB system and has nothing to do with how the landlord spends the rental income and whether or they are tenants somewhere else.

There are restrictions on whether home owners/landlords can receive HB at other properties when they own a property but do not occupy it, though, because of the rules around capital and HB liability, etc.

grummps

BigAunty wrote: »

Wrong on many counts.

The HMRC will tax the father on the income less allowable business expenses, such as the interest part of the mortgage, repairs, the wear and tear allowance and similar. No profits = no tax to pay.

Tax is paid through an annual return, not quarterly.

He will not pay tax on a notional rent set by LHA/housing benefit rates but on actual income. The HMRC do not tax imaginary/notional profits but actual ones (actual turnover .

He may have to consider capital gains tax (see the HMRC website) if he sells in future.



Wrong on so many counts.

The term 'contrived tenancy' applies solely to when the DWP determine that a tenancy between close relatives has been set up to exploit the HB system and has nothing to do with how the landlord spends the rental income and whether or they are tenants somewhere else.

There are restrictions on whether home owners/landlords can receive HB at other properties when they own a property but do not occupy it, though, because of the rules around capital and HB liability, etc.

I couldn't have put it any better.

By the way, the father is best charging the full LA rate, not the maximum he could get.

Daughter would have to find the balance over the LA rate to give to dad, dad would have to show it as income, and no doubt like most dads do - hand the difference back to his daughter as a present. No parent would want to make a profit out of their children.

After all expenses have been deducted as well as any tax liability, the net difference of the HB received would go a long way towards renting a place for himself.

princessdon

grummps wrote: »

I couldn't have put it any better.

By the way, the father is best charging the full LA rate, not the maximum he could get.

Daughter would have to find the balance over the LA rate to give to dad, dad would have to show it as income, and no doubt like most dads do - hand the difference back to his daughter as a present. No parent would want to make a profit out of their children.

After all expenses have been deducted as well as any tax liability, the net difference of the HB received would go a long way towards renting a place for himself.

isn't that what they call a "contrived tennancy"

Ie charging more to hand back in cash to the family member?

grummps

princessdon wrote: »

isn't that what they call a "contrived tennancy"

Ie charging more to hand back in cash to the family member?

No it isn't. As long as the property is let on commercial terms, what dad does with his daughter has nothing to do with it. Dad could give it to the daughter split as to a birthday present/Christmas present, both of which are not treated as income on the daughter.

emsywoo123

grummps wrote: »

Daughter would have to find the balance over the LA rate to give to dad, dad would have to show it as income, and no doubt like most dads do - hand the difference back to his daughter as a present. No parent would want to make a profit out of their children.

Please pop round to my dad's to tell him he is meant to be giving me some money ta! :rotfl:

princessdon

Wow - I'd have thought it would be - ie they are charging more just purely because the tax payers pay then giving the tennant subs in cash.

Guess if it is legal it is - morally tho - not ideal!