Rent free property

Rent free property

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We have just moved to the other end of the country with my job, which comes with a rent free house thrown in. We will be here for at least 5 years so my daughter & her husband have moved into our house and will be living there rent free while they save up to buy a house of their own. If I decide to settle here and sell our house will there be any capital gains implications since we wont have lived in it for perhaps 5 or 6 years by that time?

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By stratty
17th May 2013 19:48

PPR and Lettings Relief

The majority of any gain will probably be covered by Principle Private Residence and Lettings Relief.

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By John Collingwood
17th May 2013 23:04

That's a pint I owe you

Thanks for pointing me in the right direction.

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By brian.barrett
18th May 2013 00:48

Lettings Relief

You will need to check on the effect of not charging your daughter any rent as this may not be available for lettings relief (which is lower of £40k, relief you get for PPR and relief you would get if you still had it as your PPR for the rented period).

Lettings Relief may only be available if you let the house on a business basis i.e. with the aim of making a profit; or if you actually do rent, i.e. get income, from the rent.  I am not sure, but it may turn out that you may benefit from charging some sort of low or peppercorn rent.  This will be taxable but any lettings costs eg repairs or mortgage may bring this down to zero.

Whatever the result is on the Lettngs Relief, you will still get PPR equal to 'profit' x (A+3)/C - where A is time lived in, C is time owned.  That will then be reduced by the CGT annual allowance, say £10k and the result taxed at 28%.

An alternate approach may be to actually spend some time at your house whilst your daughter lives there, so that your daugher and husband (her's not yours) will effectively be lodgers.  You will nominate your own house as your PPR.  For this to be valid you will need to pay the bills for your house and be able to demonstrate that it is your house to live in - i.e. retain a bedroom for your own use etc.  This will extend the time you are classed as living there until your daughter [finally] buys a house and you rent the house out to some 3rd party.

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By Steve Kesby
18th May 2013 09:01

Are you saying...

... that your new employer is providing you with living accommodation?

Will it be a taxable benefit?

If it's covered by one of the exclusions, then you may be deemed to still be occupying your own property as your main residence under the job-related accommodation rules. See CG64555.

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By John Collingwood
18th May 2013 11:59

So it seems that helping the kids is going to cost me money. Nothing new there then :).  Has anyone else noticed that once they leave home children actually cost you more?  Or am I just too soft.

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By brian.barrett
18th May 2013 13:21

Location of Work

When answering I had assumed that the free house was a perk and not somewhere where you needed to reside in order to conduct your duties.  As an example a police office having to live in a rural police station (if any still remaining) would be such an example.

An interesting issue I have found, however, is that if you work outside of the UK for your job, then any period of absence because of your job will be considered as though you were living in your house.  (And you/I would need to check whether period of absence means at some stage you had to return to your house after that period - but if tax advantageous it could be worth doing that for a few months.)

The interesting bit of the above is the 'UK' part - so if you have moved to Scotland for your work, and they vote next year for separation from the UK, then as the law stands when they do separate you would be working abroad and there would be no limit to the length of your 'period of absence'!  Not doubt, however, UK may be redefined in these circumstances or modifications in the law [TCGA 1992 s.223(4)].

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By John Collingwood
18th May 2013 18:59

Gift?

I'm beginning to think the simplest option is to just give the house to my daughter and buy a new one for us once this contract is finished in about 5 years.

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