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Is this income from property

have a client who has bought a property for his son to use, He raised the finance by cashing in endowments remortgaging on his own property and interest only mortgage. He pays £194 a month on IO mortgage and his son gives him £200 a month 'rent'. Obviously if we did income from property sched it would result in a loss, and he can hardly be described as charging a commercial rent, there is no formal rent agreement. I can't see much point in registering him, what does anyone think?

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21st Jul 2011 16:36

rent at undervalue

As this is not a commercial rent, it is not a rental "business", so no need to declare it unless at some point income exceeds expenses.

Be aware that in this situation losses are not available to carry forward year on year.

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21st Jul 2011 16:56

more info

what would an arms length rent be?

is there any form of tenancy or written agreement?

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21st Jul 2011 17:17

re income from property

Arms length would be in the £450-£500pcm range I would think, it a (small) 3 bed end terrace. My feeling is there is no 'business' there. the plans are for the son to buy the property in the next 3-4 years, there is no intention to turn it into a commercial let. I appreciate there may be CGT issues on sale, but the way property is performing probably wont be!!

Many thanks

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22nd Jul 2011 04:50

Property not let at commercial rent

This link to HMRC's ProprtyIncome Manual PIM2220 provides the answer, http://www.hmrc.gov.uk/manuals/pimmanual/PIM2220.htm

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