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  • FIRST POST
    • happyandcontented
    • By happyandcontented 15th Sep 18, 5:42 PM
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    happyandcontented
    Theoretical Question re selling a house and benefits
    • #1
    • 15th Sep 18, 5:42 PM
    Theoretical Question re selling a house and benefits 15th Sep 18 at 5:42 PM
    I visited an old friend today who has been on benefits for many years due to mental health issues. Currently, she is living with her mother but still has her own property.

    Her plan is to sell the house to her daughter and son in law for 1, let them rent it out and give her the money. This will enable her to stay on benefits.....to say I was gobsmacked is an understatement!

    I outlined the issues that could arise from: the couple splitting up, the possible benefit fraud, the lack of capital in old age for nursing care etc, etc. She thinks the plan is foolproof!

    Is it possible to sell a house for such a sum?
    Would it be seen as deprivation of capital?
    How could they find out?

    Any other comments?
Page 1
    • Sunny Intervals
    • By Sunny Intervals 15th Sep 18, 5:47 PM
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    Sunny Intervals
    • #2
    • 15th Sep 18, 5:47 PM
    • #2
    • 15th Sep 18, 5:47 PM
    If she currently owns a property that she isn't living in, shouldn't it already be affecting her benefits? I'm assuming they're income-based from the rest of the post?
    • happyandcontented
    • By happyandcontented 15th Sep 18, 5:57 PM
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    happyandcontented
    • #3
    • 15th Sep 18, 5:57 PM
    • #3
    • 15th Sep 18, 5:57 PM
    If she currently owns a property that she isn't living in, shouldn't it already be affecting her benefits? I'm assuming they're income-based from the rest of the post?
    Originally posted by Sunny Intervals
    I doubt she has told anyone. It was initially supposed to be a temporary arrangement but as the months have gone on she is reluctant to return home. I am not sure what benefits she is on but if she sold the house in the normal way she says they would be affected.
    • PasturesNew
    • By PasturesNew 15th Sep 18, 6:19 PM
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    PasturesNew
    • #4
    • 15th Sep 18, 6:19 PM
    • #4
    • 15th Sep 18, 6:19 PM
    She can sell it to them for 1.
    The DSS will assume she receives full rent for it.
    Her benefits will be stopped accordingly.
    • Sunny Intervals
    • By Sunny Intervals 15th Sep 18, 6:19 PM
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    Sunny Intervals
    • #5
    • 15th Sep 18, 6:19 PM
    • #5
    • 15th Sep 18, 6:19 PM
    Honestly, it's going to be difficult to give any advice when you don't have all the information and are working on assumptions.

    You can sell a house for 1, but the amount it's sold for is public record, so it would be pretty easy to connect the dots. Having a regular amount going into her bank account might raise questions, which would then lead back to her effectively giving the house away.

    If she's mentally ill, she might not be processing the risks and consequences properly.
    • poppy12345
    • By poppy12345 15th Sep 18, 6:33 PM
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    • #6
    • 15th Sep 18, 6:33 PM
    • #6
    • 15th Sep 18, 6:33 PM
    Unless you know exactly what benefits your "friend" is claiming then no one can answer your questions and give you further advice.
    • Afraid of Kittens
    • By Afraid of Kittens 15th Sep 18, 6:58 PM
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    Afraid of Kittens
    • #7
    • 15th Sep 18, 6:58 PM
    • #7
    • 15th Sep 18, 6:58 PM
    1) Data Matching will automatically flag up a property has been sold for less than it was purchased for. This will launch an investigation into the person who gave it away.

    2) A very sticky tax situation. Rental income is taxable. The daughter and son in law will be liable for tax on the rental income irrespective if they give it away as a gift.

    3) Does she have the mental capacity to make such a decision?

    4) She will be found out. It might take a few years but once she has been discovered that she has given away the property she will be treated as if she still owned the property and she has deliberately deprived herself of capital. All means tested benefits will cease.

    https://www.ormerodrutter.co.uk/earning-extra-rental-income-how-will-hmrc-ever-know/

    https://www.telegraph.co.uk/finance/personalfinance/tax/11697816/What-does-the-taxman-know-about-you-your-finances-and-your-lifestyle.html

    This isn't a 'foolproof' plan. Others have tried and failed. The Data Matching system is geared up to catch such scams.

    However.

    If she isn't on means tested benefits she can give away her property and out of goodwill her daughter and son-in-law can hand over the cash and pay any tax due.

    It would be simpler for the mother to rent out her property and live off the rental income and not fall foul of HMRC, DWP or her daughter conning her out of the house and rental income.

    Once she willingly gives away her only asset there is nothing stopping her daughter and son in law selling it and blowing the lot.
    Last edited by Afraid of Kittens; 15-09-2018 at 7:11 PM.
    • happyandcontented
    • By happyandcontented 15th Sep 18, 7:06 PM
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    • #8
    • 15th Sep 18, 7:06 PM
    • #8
    • 15th Sep 18, 7:06 PM
    Lol at 'friend' it really isn't me!

    I know she was on DLA (which is not means tested) but that was stopped so now she just receives what was the old long-term sickness benefit IVA. Her medical certificate is 'until further notice' and she hasn't worked since she was 22, she is now 59.

    The rent would be paid in cash to her by her daughter.

    How will the DSS know about the sale as it will be private apart from the land registry and conveyancing? I know it is public record but who actually polices that? Her son in law says it happens a lot and he works in the property sales area.

    I am aware it is fraud but she believes that it is perfectly ok, and not knowing the answers to the above questions, short of someone alerting the DSS I think she might get away with it.
    • Afraid of Kittens
    • By Afraid of Kittens 15th Sep 18, 7:13 PM
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    Afraid of Kittens
    • #9
    • 15th Sep 18, 7:13 PM
    • #9
    • 15th Sep 18, 7:13 PM
    Lol at 'friend' it really isn't me!

    I know she was on DLA (which is not means tested) but that was stopped so now she just receives what was the old long-term sickness benefit IVA. Her medical certificate is 'until further notice' and she hasn't worked since she was 22, she is now 59.

    The rent would be paid in cash to her by her daughter.

    How will the DSS know about the sale as it will be private apart from the land registry and conveyancing? I know it is public record but who actually polices that? Her son in law says it happens a lot and he works in the property sales area.

    I am aware it is fraud but she believes that it is perfectly ok, and not knowing the answers to the above questions, short of someone alerting the DSS I think she might get away with it.
    Originally posted by happyandcontented
    Google HMRC Connect computer system. https://en.wikipedia.org/wiki/Connect_(computer_system)

    Everything is now connected HMRC, DWP etc. The sale of the property will flag up that an individual on benefit has given away an asset. There will be an investigation.

    They really need to do a bit of research on Data Matching, DWP and the Connect computer system.
    Last edited by Afraid of Kittens; 15-09-2018 at 7:17 PM.
    • happyandcontented
    • By happyandcontented 15th Sep 18, 7:22 PM
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    happyandcontented
    1) Data Matching will automatically flag up a property has been sold for less than it was purchased for. This will launch an investigation into the person who gave it away.

    2) A very sticky tax situation. Rental income is taxable. The daughter and son in law will be liable for tax on the rental income irrespective if they give it away as a gift.

    3) Does she have the mental capacity to make such a decision?

    4) She will be found out. It might take a few years but once she has been discovered that she has given away the property she will be treated as if she still owned the property and she has deliberately deprived herself of capital. All means tested benefits will cease.

    https://www.ormerodrutter.co.uk/earning-extra-rental-income-how-will-hmrc-ever-know/

    https://www.telegraph.co.uk/finance/personalfinance/tax/11697816/What-does-the-taxman-know-about-you-your-finances-and-your-lifestyle.html

    This isn't a 'foolproof' plan. Others have tried and failed. The Data Matching system is geared up to catch such scams.

    However.

    If she isn't on means tested benefits she can give away her property and out of goodwill her daughter and son-in-law can hand over the cash and pay any tax due.

    It would be simpler for the mother to rent out her property and live off the rental income and not fall foul of HMRC, DWP or her daughter conning her out of the house and rental income.

    Once she willingly gives away her only asset there is nothing stopping her daughter and son in law selling it and blowing the lot.
    Originally posted by Afraid of Kittens
    I pointed most of that out to her, but she has been on benefits for so long that she cannot see life without them and sees this as a way out.
    • TELLIT01
    • By TELLIT01 15th Sep 18, 7:27 PM
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    TELLIT01
    A lot of assumptions to be made but....
    If she is claiming Income Related benefits and has a property she isn't living in it would be classed as an asset (capital) unless it is up for sale. If it isn't, and her change of circumstance hasn't been reported, she is already commiting benefit fraud.

    If she sells the house for less than market value with the intention of being able to continue to claim benefits, it will almost certainly be classed as deprivation of capital and she will lose benefits.
    • poppy12345
    • By poppy12345 15th Sep 18, 7:28 PM
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    poppy12345
    I know she was on DLA (which is not means tested) but that was stopped so now she just receives what was the old long-term sickness benefit IVA. Her medical certificate is 'until further notice' and she hasn't worked since she was 22, she is now 59.
    Originally posted by happyandcontented
    I have no idea what IVA is... ESA is the benefit people claim when they're unfit for work, previously called Incapacity benefit.
    • happyandcontented
    • By happyandcontented 15th Sep 18, 7:32 PM
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    happyandcontented
    I have no idea what IVA is... ESA is the benefit people claim when they're unfit for work, previously called Incapacity benefit.
    Originally posted by poppy12345
    And before that ( when I worked for what was then the DHSS) it was called Invalidity Allowance.
    • happyandcontented
    • By happyandcontented 15th Sep 18, 7:36 PM
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    happyandcontented
    A lot of assumptions to be made but....
    If she is claiming Income Related benefits and has a property she isn't living in it would be classed as an asset (capital) unless it is up for sale. If it isn't, and her change of circumstance hasn't been reported, she is already commiting benefit fraud.

    If she sells the house for less than market value with the intention of being able to continue to claim benefits, it will almost certainly be classed as deprivation of capital and she will lose benefits.
    Originally posted by TELLIT01
    She is still paying all the bills associated with the house whilst living 'temporarily' with her mother.
    • Sunny Intervals
    • By Sunny Intervals 15th Sep 18, 7:38 PM
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    Sunny Intervals
    And before that ( when I worked for what was then the DHSS) it was called Invalidity Allowance.
    Originally posted by happyandcontented

    Well, that might explain why she doesn't think she'll get caught. Thinks everything's still done with card files and bits of paper in filing cabinets.


    In all seriousness, though, she's making a horrendous financial and legal decision. If this is a result of her mental illness, maybe her daughter should be looking into some kind of apointee/power of attorney type arrangement, rather than supporting this silliness?
    • happyandcontented
    • By happyandcontented 15th Sep 18, 7:43 PM
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    happyandcontented
    Well, that might explain why she doesn't think she'll get caught. Thinks everything's still done with card files and bits of paper in filing cabinets.


    In all seriousness, though, she's making a horrendous financial and legal decision. If this is a result of her mental illness, maybe her daughter should be looking into some kind of apointee/power of attorney type arrangement, rather than supporting this silliness?
    Originally posted by Sunny Intervals
    I don' think she is aware of how the DSS operate on a daily basis.

    I don't believe this is a result of her illness, more of her belief that she has to have these benefits because that is the status quo.

    It wasn't her idea it was her son in laws....but she sees it as the way forward. Her 83-year-old mother is her appointee. Her mothers' estate is a whole other can of worms just waiting to be opened.
    • Afraid of Kittens
    • By Afraid of Kittens 15th Sep 18, 7:44 PM
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    Afraid of Kittens
    She is free to do whatever she choses with her property.

    She really does need independent legal advice before she does this.

    By giving away her property and not living in it she gives up all legal rights to ownership, occupation and any subsequent rental income.

    If her daughter sells it she will be hit by large bill for capital gains tax (1 purchase v sale price minus 1).

    The mother will be classed as depriving herself of an asset for benefits purpose.

    The daughter will be liable for tax on any rental income.

    Giving away the property has many complicated legal and tax and benefit implications. She needs specialist legal advice so she goes into this with her eyes wide open.
    • happyandcontented
    • By happyandcontented 15th Sep 18, 7:47 PM
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    happyandcontented
    She is free to do whatever she choses with her property.

    She really does need independent legal advice before she does this.

    By giving away her property and not living in it she gives up all legal rights to ownership, occupation and any subsequent rental income.

    If her daughter sells it she will be hit by large bill for capital gains tax (1 purchase v sale price minus 1).

    The mother will be classed as depriving herself of an asset for benefits purpose.

    The daughter will be liable for tax on any rental income.

    Giving away the property has many complicated legal and tax and benefit implications. She needs specialist legal advice so she goes into this with her eyes wide open.
    Originally posted by Afraid of Kittens
    Her daughter rents her own house so the house off her mother would be her only property, although she would not live in it personally, as it isn't in a suitable location for her family.

    The daughter has said she would give her mum the rental income minus the tax she would be required to pay.
    • Afraid of Kittens
    • By Afraid of Kittens 15th Sep 18, 7:49 PM
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    Afraid of Kittens
    I don' think she is aware of how the DSS operate on a daily basis.

    I don't believe this is a result of her illness, more of her belief that she has to have these benefits because that is the status quo.

    It wasn't her idea it was her son in laws....but she sees it as the way forward. Her 83-year-old mother is her appointee. Her mothers' estate is a whole other can of worms just waiting to be opened.
    Originally posted by happyandcontented
    The son in law and daughter must be seeing signs.

    They will say and do anything to reassure the poor old Mum that this is a good idea and it could leave the Mum hgh and dry when everything goes pear shaped.

    She needs to be sat down in front of someone qualified and away from the tentacles of the son in law to be given the advice (that she probably doesn't want to hear) that this whole scam/scheme really isn't a good idea.
    Last edited by Afraid of Kittens; 15-09-2018 at 7:55 PM.
    • poppy12345
    • By poppy12345 15th Sep 18, 7:57 PM
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    poppy12345
    . Her 83-year-old mother is her appointee.
    Originally posted by happyandcontented
    Then it's her mother's responsibility to report any changes which can affect the benefits she claims.


    https://www.gov.uk/become-appointee-for-someone-claiming-benefits
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