Benefit in Kind - does it fall on widow

shamoo

Hi all

I really hope you can help? I have been searching and reading as I'm trying to get a better understanding of benefit in kind. I know a little bit of knowledge can be dangerous so i'm hoping that I don't fall into that trap as tax is a very confusing subject.
My dad passed suddenly and unexpectedly a couple of months ago. He was a director of the family run company, and a perk of the job was a house. (He was also beneficiary of this house before he passed, another problem for another day). He paid £1000 per month rent which is under the value market for a house of this type. Also we have a signed letter from the owner of the house (my Grandad) stating my mum can live there indefinitely should anything happen to my dad. The house is in the company's name.
The problem now is, my granddad is saying rent has to be paid for tax purpose. My mum is on disability benefits, she is unable to work, her benefits is less than the rent.
Does the benefit in kind only apply to employee and employer? where does my mum stand, can she for now live there rent free until all this mess is sorted without any tax implications to her and the company.. sorry for the long post I really appreciate your help.

jfdi

If the rent is needed for tax purposes only, could mum not claim housing benefit and grandad just accept whatever she gets awarded?

booksurr

jfdi wrote: »

If the rent is needed for tax purposes only, could mum not claim housing benefit and grandad just accept whatever she gets awarded?

that could very easily be considered a "contrived" tenancy designed only to extract a benefit payment, given mother has a legal right to occupy the property which over rides grandfather's ability to evict her

antrobus

Your father rented a house from his employer for £1,000 a month. The statement that your mother can now "live there indefinitely" should be taken as nothing more than an indication that the employer is not going to evict your mother. When possibly they could do so. (I don't know, you would have to see a solicitor to find out what rights your mother has.) But it doesn't change the fact that the rent is £1,000 a month.

Your father "paid £1000 per month rent which is under the value market for a house of this type". The benefit in kind would be the difference between that £1,000 and whatever the actual market rent would be, on which he would have been taxed. In other words, the benefit in kind is in addition to that £1,000.

The point would be that the question of the £1,000 a month rent is an issue for the company and your mother, and nothing to do with tax.

Whether or not your mother would also be assessed on the benefit in kind would be another question. Someone asked a similar question on the link below. The answer appears to be yes.

http://www.taxation.co.uk/taxation/Articles/2011/06/08/25342/no-direction

Note that not paying the £1,000 rent simply increases the benefit in kind that would be taxable.

Pennywise

shamoo wrote: »

Also we have a signed letter from the owner of the house (my Grandad) stating my mum can live there indefinitely should anything happen to my dad. The house is in the company's name.

You've contradicted yourself. Who owns it. You've just said that your Grandad owns it and then that it's in the company's name. It can't be both!

missbiggles1

Pennywise wrote: »

You've contradicted yourself. Who owns it. You've just said that your Grandad owns it and then that it's in the company's name. It can't be both!

And the father was also a "beneficiary of this house before he passed", whatever that means.

xylophone

Who owns the house, your grandfather or the company?

Did your father have no insurance or private pension with widow's benefit?

shamoo

Pennywise wrote: »

You've contradicted yourself. Who owns it. You've just said that your Grandad owns it and then that it's in the company's name. It can't be both!

my grandad owns the company and the house is in the company's name,

shamoo

missbiggles1 wrote: »

And the father was also a "beneficiary of this house before he passed", whatever that means.

in the will of my grandad the house would have been left to my father, the company is owned by my grandad

shamoo

xylophone wrote: »

Who owns the house, your grandfather or the company?

Did your father have no insurance or private pension with widow's benefit?

yes he had insurance and private pension, I'm not sure what this has to do with tax in kind?

shamoo

I appreciate people trying to help. I'm really after one answer to one question. Where does the benefit kind stop, if it does? surely benefit in kind is between employer and employee? my mum is not an employee, is this still a benefit in kind?
thanks again