Mother moves in and pays rent

Mother moves in and pays rent

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My client owns a large house, split into flats and rents them out,  His mother is moving in due to her fraility and will be payng him sum money.  Does this need to be declared as rental income, or can we treat this as a gift from mother to son?

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By tladirect
13th Sep 2011 15:50

Tenant or ?

You do not say whether your client also lives in the large house which has been split into flats; however, you may wish to consider the following statements:

If your client's mother lives in one of the separate flats and this flat has a history of being let to tenants and they have a formal tenancy agreement and she pays a market rent and there is evidence that actual rent is paid - then there are strong reasons for someone to believe that the monies received constitute rental (taxable) income.

If the flat was un-let or unavailable for letting because of say, refurbishment, there would of course be no rental income.

Your client's mother is entitled to make an annual gift to anyone free of IHT implications of up to #3000.00.

If your client actually lives in part of the house and his mother also lives in part of the same house he would (possibly) be entitled to receive (non-taxable) rent under the rent-a-room scheme of up to #4250.00.

I hope this is of interest.

 

 

 

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By Steve Knowles
13th Sep 2011 16:00

commercial rent?

If the flat is being let to the mother, it is income, whether this is a full rent or not - if not at a full rent, the expenses which can be claimed in respect of this flat are restricted to the amount of the rent received. If it is not let, ie if the son has no right to any income, money given by the mother to the son is not taxable, but it should be made clear that such gifts are not in respect of rent - perhaps an agreement to the effect that the flat is occupied rent-free. Any expenses in respect of the flat will then be completely disallowed for tax.

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