Tax on Family Rent

silvercar

It is accepted in tax treatment that any relatives living in the family home contribute "keep" to the pot without requiring a cut for the taxman. Upscaling this to the parents providing a different property but essentially the offspring contributing to the pot in the same way, shouldn't be treated any different IMHO or is there one rule for the rich and one for the poor?

silvercar

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'm sure if they are in a position to buy a property outright and have no need for the rental income, they are already contributing their "fair-share" of tax.

Dr_Teeth

Likewise, if they can afford to buy a property outright, they can afford to pay the tax on income from renting it out.

Yorkie1

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?

The thing is, there was no original loan and no agreement for subsequent repayments in any way.


Therefore any document you draw up now which purports to be the legal basis for a loan / repayment schedule, would not reflect the truth of the situation.


It is a fiction, created solely to enable the parents to evade tax which would otherwise be deplorable / payable on the rental income.


The creation of such a document would be the offence of false accounting as well as linked to tax evasion.


HMRC has had a recent crackdown on tax paid by landlords. It really isn't worth the risk.

Mojisola

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.

Aren't they paying tax on the interest they are earning on the money now?

zygurat789

Why bother about what may have been a loan in the past and creating taxable income today? The parents could afford to lend their daughter the money to buy the house and for her to repay this loan, which is interest free, out of her combined income with the OP.
The parents are receiving their capital back but not as income which they are foregoing, as they have been doing for years by the sounds of it.
All needs to be legally documented.

notanewuser

Dr_Teeth wrote: »

Likewise, if they can afford to buy a property outright, they can afford to pay the tax on income from renting it out.

Not if they're living and working in the UAE or another tax haven.

silvercar

zygurat789 wrote: »

Why bother about what may have been a loan in the past and creating taxable income today? The parents could afford to lend their daughter the money to buy the house and for her to repay this loan, which is interest free, out of her combined income with the OP.
The parents are receiving their capital back but not as income which they are foregoing, as they have been doing for years by the sounds of it.
All needs to be legally documented.

Except that the property is in the name of the parents, not the daughter.

Mojisola

pogdog wrote: »

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.

If you two can afford a market rent, could her parents loan the money to buy the house outright and you repay the debt each month? They wouldn't be landlords so that keeps them out of all the legislation.

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

There's a lot of parents who help their children financially when they are at uni or during times of illness or other major difficulties. Do you really think that they should all be able to reduce the tax they pay in the future because of that?

eddddy

So here's my 2 cents - I think you should look at the situation like this:

The parents chose to support their daughter through university, by giving (gifting) her money. The same happens in many families.

Presumably, the daughter is 'better off' now, so she is now choosing to give (gift) some/all the money back to her parents. That seems like a very moral and reasonable thing to do.

The parents are fortunate enough to own two houses. They choose to let their daughter live in one rent free. Whilst most people are not lucky enough to be in that position, it seems perfectly reasonable.


All the above seems like perfectly 'normal' family behaviour to me. I can't see it raising any eyebrows at hmrc.

(I think it would be rather abnormal to make your daughter sign a loan agreement in order to support her at University, as some suggest. When I lend or give my kids money, I don't ask them to sign anything.)

Obviously, in legal terms, you wouldn't have tenants' rights, and the parents wouldn't have Landlord obligations. (You would probably have about the same rights as if you were 'living with parents')