Property let to relative

Property let to relative

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A property owned by H&W is occupied by the wife’s sister who left her home following some family dispute. There is no lease agreement. She makes voluntarily regular monthly payments slightly lower than rent paid by previous unrelated tenant and H&W make a good profit.

H&W say that they would let her stay free and the monthly receipts gifts. What is the tax position - can the receipts be really regarded as gifts?

Advice much appreciated.

Replies (6)

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By cheekychappy
26th Jan 2016 10:33

It's not a gift.

 

The income is taxable. The expenses are still allowable but cannot create a loss.

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By newman
26th Jan 2016 12:00

Property let to relative
Forgot to mention, the H&W do not bother with the usual landlord's obligations such as gas safety checks, repairs, renewals of furnishings ...

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Replying to paul.benny:
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By User deleted
26th Jan 2016 13:11

Gas

newman wrote:
Forgot to mention, the H&W do not bother with the usual landlord's obligations such as gas safety checks, repairs, renewals of furnishings ...

Gas safety checks are a legal obligation. If there is a problem, God forbid a fatality. Your clients will probably go to prison. A gas safety certificate would make a very small dent in "a good profit".

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By Duggimon
26th Jan 2016 12:06

Oh well in that case it's all tax free as there's a long standing exemption from tax for landlords who disregard all regulations.

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By cheekychappy
26th Jan 2016 12:14

Just because your clients disregard their legal responsibilities, does not mean they get out of their tax position.

May I suggest you read what you have wrote in this thread. Your outlook is concerning given that you are purporting to be a professional.

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By Ian McTernan CTA
26th Jan 2016 13:00

A bit Harsh..

Some harsh truth.  You don't sound qualified to give any advice in this area.  Like many 'accountants', the temptation is to take on all work, whether you are an expert in that field or not.  Personally I have a group of experts that I pass matters on to - such as a SDLT query recently, client more than happy to pay the £1800 charged for the advice as it meant we had certainty.  Play to your strengths, seek paid for advice where at all uncertain. 

As cheekychappy pointed out, there are legal responsibilities for landlords and you would do well to learn these before advising clients with rental properties.  And make sure your PI cover is up to date...

You answered your own question in the terms you used 'regular monthly payments' 'a good profit'.

There is a tenancy in existence whether they realise it or not, and this means there are certain obligations imposed by the various Acts.

In fact, your clients may find it next to impossible to remove the wife's sister if she hired good lawyers.

You should be advising them to formalise the tenancy so that an AST is in place.  And the rental income should be reported as such.

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