Renting from family- complicated.

lucrezia_borgia

Hi everyone,

I have a bit of a problem here. I know absolutely nothing about renting rules.

My partner works at his sister's shop. We also live in her house, and we pay her £400/month in rent. She makes no profit from the rent whatsoever, it just covers the mortgage. Council tax and all the bills are in my partner's name, but he pays rent in cash and they don't have a formal contract. He's been living here for 5 years and I moved in 2 years ago.
Now, we have a baby and we are sort of struggling. Can we claim housing benefit in this situation?

theartfullodger

So let me guess, sister hasn't been declaring ALL her rental income, less permitted expenses (mortgage interest only, not the repayment bit)...

Sister had better contact HMRC & do so quick before they find out ... so as to reduce the fines & penalties below what they can be.. eve
https://www.gov.uk/let-property-campaign
- this is serious, she doesn't want to get a record as a tax-cheat & pay large fines. I'm sure she did not think she was doing anything wrong of she hasn't been declaring...

Apart from anything else, if she really has made a loss she can use it to reduce tax when she makes a profit renting property.


Your problem is that it would be regarded as a "contrived tenancy" only set up to get HB/LHA.
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

Your best bet it to rent somewhere else, normal commercial rent, claim HB/LHA, sister rent to someone else, sister get all her records legit & then sister evict her tenant & you move back in... but even then council will be (understandably) suspicous

Cheers!

alias*alibi

No you cannot claim housing benefit whilst renting from a family member.

lucrezia_borgia

Well, she's not making a loss and she's not making a profit. We just live there and pay the mortgage. Oh dear, this is super-complicated, none of us knows how to go about it... and honestly, we never meant to do anything fraudulent at all! :O

duchy

How does the £400 a month compare with comparable market rents in the area ?

As your SIL has a shop presumably she also has an accountant. Perhaps as they will know more about the ins and outs of your sister's finances they may be able to offer some advice.

duchy

alias*alibi wrote: »

No you cannot claim housing benefit whilst renting from a family member.

Not strictly true

dodger1

alias*alibi wrote: »

No you cannot claim housing benefit whilst renting from a family member.

You can if it's not a contrived tenancy.

sheramber

lucrezia_borgia wrote: »

Well, she's not making a loss and she's not making a profit. We just live there and pay the mortgage. Oh dear, this is super-complicated, none of us knows how to go about it... and honestly, we never meant to do anything fraudulent at all! :O

She cannot claim any capital repayment of the mortgage as expenses from her rental income.

She can only claim mortgage interest payment as an expense.

So if mortgage payment is £400 made up of e.g £100 interest payment and £300 capital repayment then she can only claim mortgage expense of £100 , leaving a profit of £300(less any other rental expenses she can claim).

She can then use any profit after tax to repay her mortgage capital.

If her whole mortgage payment of £400 is interest only then she can claim the whole amount as an expense.

https://www.gov.uk/renting-out-a-property/paying-tax

Kynthia

It is possible to claim LHA while renting from family. However you'd need to show its not a contrived tenancy. So can you evidence that you've been living there a while and that you've paid rent every month while living there? It would have been better to have a written contract but you could have one now and your landlord having evidence of past tax returns and gas safety certificates would possibly be useful.

However it seems like your landlord has been avoiding declaring the income and possibly needing to pay tax, and you paying in cash has been helping her to do this. If this deceit means you'll struggle to evidence you have a proper tenancy then there's not a lot we can suggest.

tea-bag

Renting from family and getting HB has been going on for years. Some sections of the community have been abusing this for years!

gazter

tea-bag wrote: »

Renting from family and getting HB has been going on for years. Some sections of the community have been abusing this for years!

Especially with the six figure housing benefit claims that used to happen in London. Everyone involved knew it was a fraud.