I don't know the first thing about housing benefit. Please help.

fluffymovie

I have read this thread with interest as it is a topic which comes up quite often and which people seem to get quite het up about!

In Housing benefit law, there is no rule which says that HB cannot be paid if you rent from a relative, unless, that close relative also lives in the property. Reg 9 of the HB regs 2006.

However, when a family member such as a parent owns the property and is renting it to another family member, other issues need to be considered - also covered by Reg 9 of the HB regs.

1 - Is this a contrived tenancy - a contrived tenancy is not really affected by the rent charged, it is a sham tenancy. That is to say, that there is no legally enforceable liability prior to it's creation and it's creation is to 'take advantage of the [HB] scheme" To give an example, Mrs A lives in a room in a friends house for free for 4 months but then sadly loses her job. She is advised to claim JSA and at the interview, is asked if she would like to claim HB. She says she would and her friend therefore states that she will now charge her £50 per week. This liability was clearly set up because Mrs A could claim HB and therefore, the tenancy would be considered contrived and HB refused.

2 - Non Commercial - This is where the LA accepts that there is a legally enforceable liability to pay rent but do not believe that the property is being let on a commercial basis. This is more common than 1 as it's often the case that parents would not ask their child to leave if they couldn't pay, or that they are helping out in some way. In order for it to pass the test, the tenancy needs to operate on the same basis as it would for a person they had no personal relationship with. It should be managed 'at arms length' as it were.

It sounds to me like the property in question was bought as an investment but that the OP is not acting as a commercial landlord would act and so the HB claim should not be paid. However, I have taken stronger cases to appeal and lost!

NYM

You have to notify HMRC that you are operating a business and submit returns and of course you'll incur all the usual expenses of being a landlord. Insurances/certificates etc.

Maybe you best have a read of this...http://propertytaxforlandlords.co.uk/uncommercial-lets-tax-trap-gooders/