Tax on Family Rent

pogdog

Hi,

I'm in a position where my girlfriend's parents are buying a house for us to rent from them - no mortgage, just buying the house out right.

We will be paying them market value rent.

I was wondering what their (the parents) income tax position will be? Is there any relief because we are family members? How about the fact that the parents supported my girlfriend through university - could the rent be seen simply as repaying a loan?

Any help would be appreciated. Thanks.

jjlandlord

They own a house and they let it: The rent is income, and as such taxable.

TrickyDicky101

The legal position is that your girlfriend's parents must account for the income in their (individual) annual tax returns. There are no reliefs available due to her being family.

Cash doesn't have much of an audit trail.

G_M

No. Sorry. No concessions!

It is a business. There is income. There are normal tax allowances (see HMRC here). The income less allowances is then taxable.

Even if the allowances = the income, a tax declaration must be made.

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silvercar

They own a house and can choose what to do with it. If they want to let it to you rent free they can.

If your girlfriend wants to repay previous loans/ love and kindness she can do so- random gifts are not subject to tax.

To avoid accusations of rent by another name, I would keep them random. Maybe treat the parents to a holiday.

theartfullodger

Many consider it wise to ensure there is an audit trail (eg paying by bank standing order...) so that, should circumstances change & you need to claim Housing Benefit/LHA there are no/easier objections from the council housing persons...

Surely any patriotic person would be keen to pay their fair-share of tax with no attempt to wriggle/fiddle out of it??

pogdog

theartfullodger wrote: »

.Surely any patriotic person would be keen to pay their fair-share of tax with no attempt to wriggle/fiddle out of it??

I agree, it just seems a bit silly that they've given my girlfriend so much in the past few years and as soon as we start giving some of it back it's taxed.

G_M

pogdog wrote: »

I agree, it just seems a bit silly that they've given my girlfriend so much in the past few years and as soon as we start giving some of it back it's taxed.

But this does not appear to be repayment of a loan.

It is being paid in return for accomodation - it is rent.

pogdog

G_M wrote: »

But this does not appear to be repayment of a loan.

It is being paid in return for accomodation - it is rent.

Then you draw up a document advising that the accommodation is being provided rent free and that the repayments are for previous monies lent...could that fly?

jjlandlord

pogdog wrote: »

Then you draw up a document advising that the accommodation is being provided rent free and that the repayments are for previous monies lent...could that fly?

Mr HMRC would probably be very interested in seeing documents proving that the loan was agreed and that the money was paid, and that the repayments match the loaned amount.

It'd be too easy otherwise, wouldn't it?

BigAunty

pogdog wrote: »

I agree, it just seems a bit silly that they've given my girlfriend so much in the past few years and as soon as we start giving some of it back it's taxed.

Tell them not to feel so bad - the money raised in taxation goes towards all sorts of schemes that help the less fortunate onto the housing ladder or homelessness prevention. Their gift just keeps on giving. WUM.