How is this possible (housing benefit question)?

uknick

How can somebody claim housing tax benefit for a property they rent from a close family member?

I was talking to a neighbour the other day and he let slip he'd started to receive housing benefit. But, he'd previously told me the house he lives in belongs to his son's common law wife (I know this has no legal meaning, but it gives an idea of how long they have been together), and he paid them rent for it.

He is retired, so I assume his savings/income have now dropped below the threshold for housing benefit, hence why he has only recently started receiving it.

This reeks of some form of fraud to me, but he was so open about it. He even told me how his claim was originally rejected but his son put in a successful appeal to the council.

Is there any loophole that allows this? Or, as I suspect, has somebody been more than a little economical with the truth? For instance, showing the son's partner, who has a different surname, as landlord and "forgetting" to mention their relationship.

rogerblack

In some cases, yes, it is legitimate.
It is quite legal, if amongst other things, the tenancy is on a commercial basis.
For example, if he's charged a reasonable rent and could not choose to stop paying that rent without consequence.

May cases undergo extra scrutiny in these cases - yes - as the appeal showed.

missapril75

uknick wrote: »

He even told me how his claim was originally rejected but his son put in a successful appeal to the council.
.... I suspect, has somebody been more than a little economical with the truth? For instance, showing the son's partner, who has a different surname, as landlord and "forgetting" to mention their relationship.

rogerblack wrote: »

May cases undergo extra scrutiny in these cases - yes - as the appeal showed.

Indeed.

One wonders what the appeal would have been about had the relationship not been revealed.

BigAunty

Yes - it is possible for close relatives to have a landlord/tenant relationship that results in HB for the tenant, so long as they don't live in the same property together and it is not a contrived tenancy, set up to exploit the HB system (such as not charging rent when the tenant is in employment but charging them rent when they are on benefits, for example).

See the Shelter website that explains more about this.

pmlindyloo

uknick wrote: »

How can somebody claim housing tax benefit for a property they rent from a close family member?

I was talking to a neighbour the other day and he let slip he'd started to receive housing benefit. But, he'd previously told me the house he lives in belongs to his son's common law wife (I know this has no legal meaning, but it gives an idea of how long they have been together), and he paid them rent for it.

He is retired, so I assume his savings/income have now dropped below the threshold for housing benefit, hence why he has only recently started receiving it.

This reeks of some form of fraud to me, but he was so open about it. He even told me how his claim was originally rejected but his son put in a successful appeal to the council.

Is there any loophole that allows this? Or, as I suspect, has somebody been more than a little economical with the truth? For instance, showing the son's partner, who has a different surname, as landlord and "forgetting" to mention their relationship.

You are allowed to claim housing benefit if you are renting from a close family member if you can prove that it is not a 'contrived tenancy'.


This means that the tenancy is set up on a commercial basis i.e. the landlord fulfils their responsibilities and the tenant is treated as a tenant - they would be evicted if they did not pay their rent etc etc. and/or that the tenancy was set up in order to claim benefits.


Many councils absolutely refuse to grant housing benefit to tenants renting from a family member and this seems to have happened in this case.


The appeal was won and therefore it must have been proved that it fell within the guidelines.


In this particular instance the tenancy was obviously set up before the tenant was eligible for housing benefit.


I am always at a bit of a loss as to why people get worked up about this.


The claimant, if they were living elsewhere, would be eligible for HB and someone would 'benefit' from the public money so what is the difference?

BigAunty

pmlindyloo wrote: »

I am always at a bit of a loss as to why people get worked up about this.


The claimant, if they were living elsewhere, would be eligible for HB and someone would 'benefit' from the public money so what is the difference?

I think its because the public feel that relatives are colluding in some way to pay off another relatives mortgage, that the taxpayer is funding inter-familial financial advantage. The family/business distinction is collapsed.

For example, if a son gets HB for their parents property, the chances are that one day they could inherit the property that the tax payers have paid for...

Also, though it is an entirely different matter, there are many cases of HB fraud where a tenant conceals the fact that they or their partner own the property, they pretend they are just tenants and get HB paid which pays off the mortgage to their own direct financial advantage. I think this leads to people feeling uneasy about authorised landlord/tenant relationships between family members, though it is a very different matter.

Dunroamin

If the house belongs to the son's partner, she's not a relative of your neighbour anyway.

uknick

Thanks for clarifying this.

It does seem strange the rules allow for taxpayers to pay for somebody's house under these circumstances. But as said, if the father didn't rent it using HB somebody else could, so I agree, what's the issue?

At least this way you get a tenant you can trust with the house.

And, if it is a proper agreement, there may well be Schedule A implications for the landlord, so some of the HB could possibly come back in income tax, assuming the rental income exceeds the running costs.

BigAunty

Dunroamin wrote: »

If the house belongs to the son's partner, she's not a relative of your neighbour anyway.

Here it says that a partner of a child is classed as a close relative - it's the tenant's son's partner who owns it.

• parent or step-parent
• father-in-law or mother-in-law
• child or step-child
• son-in-law or daughter-in-law
• brother or sister (including half-brothers and half-sisters)
• brother-in-law or sister-in-law
• partner of any of the above.

http://england.shelter.org.uk/get_advice/housing_benefit_and_local_housing_allowance/what_is_housing_benefit/housing_benefit_if_renting_from_a_family_member#housing_benefit_if_living_in_a_property_owned_by_a_family_member


There's another restriction here though it doesn't apply to the OPs post.


You won’t be able to get housing benefit if you rent your home from:

• your ex-partner – and you and your ex-partner used to live there together, or
• your partner’s ex-partner – and your partner and their ex used to live there together.

Dunroamin

BigAunty wrote: »

Here it says that a partner of a child is classed as a close relative - it's the tenant's son's partner who owns it.

• parent or step-parent
• father-in-law or mother-in-law
• child or step-child
• son-in-law or daughter-in-law
• brother or sister (including half-brothers and half-sisters)
• brother-in-law or sister-in-law
• partner of any of the above.

http://england.shelter.org.uk/get_advice/housing_benefit_and_local_housing_allowance/what_is_housing_benefit/housing_benefit_if_renting_from_a_family_member#housing_benefit_if_living_in_a_property_owned_by_a_family_member


There's another restriction here though it doesn't apply to the OPs post.


You won’t be able to get housing benefit if you rent your home from:

• your ex-partner – and you and your ex-partner used to live there together, or
• your partner’s ex-partner – and your partner and their ex used to live there together.

That's interesting but I wonder if they mean partner in the sense of civil partner rather than in the sense of boyfriend/girlfriend?

Housing_Benefit_Officer

Dunroamin wrote: »

That's interesting but I wonder if they mean partner in the sense of civil partner rather than in the sense of boyfriend/girlfriend?

Partner is partner as in a couple - as in boyfriend/girlfriend/husband/wife/civil partner etc