Retired parents renting their house from me and cannot afford to pay

missbiggles1

Tammykitty wrote: »

For the 2nd time deprivation of assets depends on intention and the need foreseeable need for benefits/assistance at the time of depriving yourself of an asset.


The following provides interesting reading


https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/365783/hbgm-bp1-assessment-of-capital.pdf


P1.700 Treat a claimant as possessing notional capital if they have deprived themselves of the capital for the purpose of receiving or getting an increase in HB and/or CTB.


[FONT=Frutiger LT 56 Italic,Frutiger LT 56 Italic][FONT=Frutiger LT 56 Italic,Frutiger LT 56 Italic]HB(SPC) Reg 49 & 50; CTB(SPC) Reg 39 & 40


[/FONT][/FONT]It also states that if parents give a child money to prevent their house being repossessed, it is not deprivation of capital, as the possibility of claiming benefits was not a significant motive. So their is a high possibility that gifting assets to stop you own house being reposed would also not count a deprivation of capital.

Given that this plan specifically involves the parents claiming HB, I'd describe that as " a foreseeable need for benefits", wouldn't you?

Tammykitty

missbiggles1 wrote: »

Given that this plan specifically involves the parents claiming HB, I'd describe that as " a foreseeable need for benefits", wouldn't you?

No, because 5 years ago when the give away the equity, they didn't forsee that their son would start charging them rent because he couldn't afford the mortgage, and didn't forsee that they wouldn't be able to give their son £200 a month.


Do you have a crystal ball that helps you see 5 years into the future?

NYM

Tammykitty wrote: »

No, because 5 years ago when the give away the equity, they didn't forsee that their son would start charging them rent because he couldn't afford the mortgage, and didn't forsee that they wouldn't be able to give their son £200 a month.


Do you have a crystal ball that helps you see 5 years into the future?

:think: he has been charging them £200 *rent* It doesn't matter if someone calls it a gift or rent, it is what it is and is declarable to HMRC.

Tammykitty

NYM wrote: »

:think: he has been charging them £200 *rent* It doesn't matter if someone calls it a gift or rent, it is what it is and is declarable to HMRC.

No it isn't as there is no income - as the mortgage interest will reduce the "profit" to below zero.


It may actually be beneficial to declare it though, as in future years if the property starts making a profit, he will be able to claim relief against previous years losses


http://www.taxassist.co.uk/resources/show-article/id/48


Reporting to HMRC

When you start renting out property, you must tell HMRC and you may have to pay tax. If you don’t, you could be charged a penalty. You must report income from property rental if you receive:

• £2,500 or more from property after deducting allowable expenses
• £10,000 or more from property before deducting allowable expenses

If your property income does not meet either of these thresholds, you must still call HMRC and possibly the Tax Credits Office, to advise them of your new income.


If you make a loss on renting, you’re unlikely to meet these thresholds. But you may want to register for a tax return voluntarily. That way you can document your losses and carry them forward to offset against future profits.

Pixie5740

Is the OP's mortgage interest only or is it repayment in which case the mortgage interest might not be enough to make the profit zero. It's not like he can deduct any other expenses since he doesn't bother doing things like the annual gas safety check.

I think there's a Housing Benefit Officer on the forum somewhere, it would be interesting to get their take on the OP's situation.

Pixie5740

Tammykitty wrote: »

It also states that if parents give a child money to prevent their house being repossessed, it is not deprivation of capital, as the possibility of claiming benefits was not a significant motive. So their is a high possibility that gifting assets to stop you own house being reposed would also not count a deprivation of capital.

This is what it says verbatim:

"For example, if a claimant gave their son or daughter money to prevent their home being repossessed, the main reason would be to help the child, not secure or increase entitlement to HB/CTB."

I take that to mean that if the parent gives money to the child to prevent the child's home from being repossessed, not the parent giving away equity to their child to prevent the parent's home being repossessed.

Tammykitty

Pixie5740 wrote: »

Is the OP's mortgage interest only or is it repayment in which case the mortgage interest might not be enough to make the profit zero. It's not like he can deduct any other expenses since he doesn't bother doing things like the annual gas safety check.

I think there's a Housing Benefit Officer on the forum somewhere, it would be interesting to get their take on the OP's situation.

The OP pays £700 I think he said on the mortgage, at least £200 of that is likely to be interest, especially is its in the first 5 years of the mortgage.

Pixie5740 wrote: »

This is what it says verbatim:

"For example, if a claimant gave their son or daughter money to prevent their home being repossessed, the main reason would be to help the child, not secure or increase entitlement to HB/CTB."

I take that to mean that if the parent gives money to the child to prevent the child's home from being repossessed, not the parent giving away equity to their child to prevent the parent's home being repossessed.

I also took it to mean that, but it shows that its the intention that is relevant, the intention in the example is to avoid the child's house being repossessed, the intention in the OP's parents case is to avoid their own house being repossessed.
If the intention was not to increase benefits, it is not deprivation of assets.

Mojisola

Tammykitty wrote: »

I also took it to mean that, but it shows that its the intention that is relevant, the intention in the example is to avoid the child's house being repossessed, the intention in the OP's parents case is to avoid their own house being repossessed.

If the intention was not to increase benefits, it is not deprivation of assets.

But there was another available option - to sell the house and keep the £75k for themselves. Instead, they chose to give that money away.

NYM

Tammykitty wrote: »

No it isn't as there is no income - as the mortgage interest will reduce the "profit" to below zero.


It may actually be beneficial to declare it though, as in future years if the property starts making a profit, he will be able to claim relief against previous years losses


http://www.taxassist.co.uk/resources/show-article/id/48


Reporting to HMRC

When you start renting out property, you must tell HMRC and you may have to pay tax. If you don’t, you could be charged a penalty. You must report income from property rental if you receive:

• £2,500 or more from property after deducting allowable expenses
• £10,000 or more from property before deducting allowable expenses

If your property income does not meet either of these thresholds, you must still call HMRC and possibly the Tax Credits Office, to advise them of your new income.


If you make a loss on renting, you’re unlikely to meet these thresholds. But you may want to register for a tax return voluntarily. That way you can document your losses and carry them forward to offset against future profits.

How convenient that the *rent* his parents have been paying is just below the threshold....:whistle:

Losses from uncommercial lets

Relief for losses is only available if the loss arises from commercial letting. If you let out a property on terms that aren’t commercial (uncommercial let), such as to a friend or a relative for a reduced rent, expenses incurred can only be deducted up to the amount of the rent received for that property. This will mean you don’t make a profit or a loss.

You can’t use any excess expenses in a later tax year, even if you subsequently start charging commercial rent in that tax year.

thesaint

Tammykitty wrote: »

I also took it to mean that, but it shows that its the intention that is relevant, the intention in the example is to avoid the child's house being repossessed, the intention in the OP's parents case is to avoid their own house being repossessed.
If the intention was not to increase benefits, it is not deprivation of assets.

I wish I had your patience when dealing with idiots. :A