Moving House

emsywoo123

princessdon wrote: »

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!

I think what he was trying to say was, for example:

* maximum LHA for claimant is £500
* House could potentially be let for £1000.
* Tenancy states rent pcm is £1000.
* Tenant receives £500 LHA and gives to her father, magically finds £500 under matress to pay for remainder of rent owed,
* Father accounts for the £1000, then gives back the £500 to daughter.

Not getting into the morals of it, as this is not the board I do not think, but it's not actually costing the taxpayer more than if said offspring were to rent a house for £500. Plus, as the father has to account for the whole £1000, more tax taken from him so better for economy.

I have no idea how I made that shady situation sound like a good thing. :rotfl: As far as I can see though, only the father misses out?

Firefox1975

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.

Good luck to the OP then. I'm afraid there may be trouble ahead.......and I don;t think a defense of "Well, so and so on MSE said it will be ok" will help.

And anyway, no one answered where the father will be living and by what means?

grummps

emsywoo123 wrote: »

I think what he was trying to say was, for example:

* maximum LHA for claimant is £500
* House could potentially be let for £1000.
* Tenancy states rent pcm is £1000.
* Tenant receives £500 LHA and gives to her father, magically finds £500 under matress to pay for remainder of rent owed,
* Father accounts for the £1000, then gives back the £500 to daughter.

Not getting into the morals of it, as this is not the board I do not think, but it's not actually costing the taxpayer more than if said offspring were to rent a house for £500. Plus, as the father has to account for the whole £1000, more tax taken from him so better for economy.

I have no idea how I made that shady situation sound like a good thing. :rotfl: As far as I can see though, only the father misses out?

Yes it does. It is a balancing act in setting a commercial rent level that makes the tenancy more valid against the extra tax the dad would have to pay.

Using your example, and with the extra £500 received, £400 should be returned to the daughter. the extra £100 would be the tax bill on the £500.

In effect it would mean that the daughter is paying £100 out of her monthly benefits to live in a £1000 a month property!

grummps

Firefox1975 wrote: »

Good luck to the OP then. I'm afraid there may be trouble ahead.......and I don;t think a defense of "Well, so and so on MSE said it will be ok" will help.

And anyway, no one answered where the father will be living and by what means?

Presumably the HB that daughter is giving him will fund a rental place for him - minus tax of course.

If that is the case, everybody is happy!

princessdon

emsywoo123 wrote: »

I think what he was trying to say was, for example:

* maximum LHA for claimant is £500
* House could potentially be let for £1000.
* Tenancy states rent pcm is £1000.
* Tenant receives £500 LHA and gives to her father, magically finds £500 under matress to pay for remainder of rent owed,
* Father accounts for the £1000, then gives back the £500 to daughter.

Not getting into the morals of it, as this is not the board I do not think, but it's not actually costing the taxpayer more than if said offspring were to rent a house for £500. Plus, as the father has to account for the whole £1000, more tax taken from him so better for economy.

I have no idea how I made that shady situation sound like a good thing. :rotfl: As far as I can see though, only the father misses out?

Not how I read it - for one his accounts would show 1K a month and so the father would need to pay this and show via S/A.

The way I read the original post was this

LHR is £1000
Market rent is £600
Dad charges daughter £1000
Dad keeps the £600 (market rent)
Dad gives daughter £400 pm

But in your example above the the LL is declaring profits not being paid - unless the father is going to charge the daughter the rent difference between LHR and what he is paying.

Sits of the confused step

BigAunty

grummps wrote: »

Presumably the HB that daughter is giving him will fund a rental place for him - minus tax of course.

He might be mortgaged up to the eyeballs and the property suffer from substantial repairs - he might not make a penny on it...

Firefox1975

grummps wrote: »

Presumably the HB that daughter is giving him will fund a rental place for him - minus tax of course.

If that is the case, everybody is happy!

Yeah, that's what im thinking Grumps.

It's wrong, whether morally or legally, He has got a guaranteed family tennant paying government money for a property that he owns whilst he is living scott free in a flat.

I don;t know the entitlements of the OP with regards to children and size of house etc. but i;m guessing this will fall foul of the Universal Credit scheme when it's finally implemented.

Either that, or the govt will find a way to make sure that any capital is more regulated between family members.

ah, whatever, It just isn't fair! lol! fair play if it is all legal and allowed. :rotfl:

emsywoo123

grummps wrote: »

Yes it does. It is a balancing act in setting a commercial rent level that makes the tenancy more valid against the extra tax the dad would have to pay.

Using your example, and with the extra £500 received, £400 should be returned to the daughter. the extra £100 would be the tax bill on the £500.

In effect it would mean that the daughter is paying £100 out of her monthly benefits to live in a £1000 a month property!

I still don't get how the taxpayer is loosing out?

BigAunty

Firefox1975 wrote: »

... .

It's wrong, whether morally or legally, He has got a guaranteed family tennant paying government money for a property that he owns whilst he is living scott free in a flat.

Though I haven't checked back to find out the age of her child, if/when her youngest child reaches 5, the tenant will be obliged to seek employment.

According to many posts on the benefit forum, landlords make easy money. This contrasts strongly with the many posts on the housing forum where landlords actually struggle with income, including having their properties trashed or suffering rent arrears....

Firefox1975 wrote: »

...

I don;t know the entitlements of the OP with regards to children and size of house etc. but i;m guessing this will fall foul of the Universal Credit scheme when it's finally implemented.

Either that, or the govt will find a way to make sure that any capital is more regulated between family members.

...

I'm not aware of any changes to capital rules under UC that will prevent a landlord from renting their property to a close family member and I've read the Universal Credit proposal paper.

The key change for landlords is that those on low income who currently receive tax credits will not qualify for any equivalent benefit income under UC - tax credits ignores equity in second properties and savings whereas they are scrapped under UC which will treat income in the same way as it does for means tested benefits now. Second home owners with a certain degree of equity will not qualify for UC, I believe.