Benefit in Kind - does it fall on widow

silvercar

shamoo wrote: »

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

A benefit in kind is by definition one paid to someone by reason of their employment. So if she is not an employee, she has no benefit in kind and therefore cannot be taxed on it.

However, the company is providing a benefit. Hmrc may argue that the benefit is being provided to your grandfather (in order that he fulfill his obligation that she remains in the house), so it could be that he has a benefit in kind tax to pay.

The only scenario that I can think of that is similar is if a company car is provided to the son of an employee, the employee is then taxed on the benefit in kind as the son is not an employee but the car is being provided by the company because the son is an employee.

The rent is a separate issue.

silvercar

Have a read of:

http://www.taxation.co.uk/taxation/articles/2006/07/13/4228/hci-sadness


Seems to back the point that no benefit in kind for relatives of deceased employees.

PasturesNew

It's all a bit confusing, but my thinking was:

Mother remaining in the house might have been in the father's will - but as the grandfather is still alive then father's not yet inherited it. So there appears to be a house in father/deceased's will (where the mother can remain) that isn't his.

It seems like the grandfather was letting the son rent the house on the cheap while he worked for him; the son expected to outlive his father and inherit the house, so wrote a will on that basis, saying his mother could remain there.

But he has no "rights" over the house at this stage, as the grandfather's not left him the house yet!

If the grandfather is still alive are there any other children of the grandfather/siblings of the father?

noh

If the house is owned by the company then it (the house) does not belong to the grandfather and he cannot therefore bequeath it to anyone. He owns shares in the company and can leave them to anyone he wishes.
The grandfather and the company are separate legal entities.

xylophone

As Noh says, your grandfather and the company are separate legal entities.

You have stated that the company owns the house. Your grandfather cannot leave property he does not own in his will.

He can bequeath the shares he owns in the company but the company will still own the house.

You stated that your father was employed by the company and that the house was provided at a lower than market rent.

His employer therefore provided him with a benefit in kind.
http://www.afhifs.co.uk/cms/filelibrary/Taxation_of_benefits_in_kind.pdf

"Living accommodation

Some directors and employees are provided with cheap or free living accommodation. This is taxed on its gross rateable value (estimated for new properties) or any rent paid by the employer if that is greater. To
the extent that the property is worth more than £75,000, there is an additional benefit charge based on the HMRC official interest rate".

Presumably your late father had regard to the above.

The widow is not employed by the company nor is she a director -
the tax regime above would not appear to apply to her. The company can charge rent at a market rate or a non market rate to a tenant of its property.

The company is choosing to allow the widow to stay in the property on a non market rent - the same rent as was paid by your father.

My mum is on disability benefits, she is unable to work, her benefits is less than the rent.

yes he had insurance and private pension

Your mother is the beneficiary of the insurance and a widow's pension?
What effect will this have on her benefits?

With the widow's pension and insurance will she be able to afford the rent?

Has she checked on any state bereavement benefits to which she may be entitled?

Pennywise

With her being family, I think the HMRC could well argue that the house is provided by virtue of her being family rather than by her being the widow of an employee. In that case, the BIK would be upon the grandfather.

I know there are arguments in relation to widow of an employee, but I think that's ignored here because of the family connection. It may have applied if the deceased wasn't related, but the connected persons rule will almost certainly come into force here.

I can't see how the BIK can land on the widow though.

getmore4less

There is also the issue of when/how the house became company owned and if the letter potentially created an interest in possession trust.

antrobus

Pennywise wrote: »

...I can't see how the BIK can land on the widow though.

The argument advanced in the link I provided, was that the arrangement would constitute an "employer-financed retirement benefits scheme" as defined by ITEPA 2003 s393a, and therefore be taxable on the widow.

(Google 'taxation No direction' to read it in full, as taxation.co.uk seems to truncate the article if you simply click a link to it.)