Share this content

Benefit in Kind charge in lieu of rent

Can I live in property I gifted to a property co without paying rent and without a BIK charge?

Didn't find your answer?

Hi everyone – I have a small property company that I set up a number of years ago with my sons. They are the major shareholders and are presently non-doms. To get it started I gifted several rented flats (unmortgaged) into it and the rental income goes to the company which is taxed etc. at normal UK corporation tax levels.

I own a small cottage (my primary residence) and I would like to also gift that to the company – really just so that all my assets are in the one place and largely already owned/controlled by my children (just in case!)

My question is if I do that, and live in the cottage without paying rent, will I incur a benefit in kind charge from HMRC? There is no inheritance tax implication as the cottage is well below the threshold of that, it would just be BIK as far as I can tell.

Not trying to avoid any onerous taxes or anything – just trying to make my affairs neat and tidy for the boys well in advance, but equally don’t want to pay a benefit in kind charge on the home I already own mortgage free just by trying to do the right thing for my kids!

Any help appreciated.

Replies (87)

Please login or register to join the discussion.

avatar
By RetiredTax
29th Jan 2021 09:40

What advice have you received from the Company's Accountant? They should be your first port of call.

Thanks (0)
avatar
By Paul Crowley
29th Jan 2021 09:50

Agree talk to the accountant

He will have some issues to point out
GWROB is one

DO NOT DO IT until you take expert advice

And it does not save carehome fees

It does not make things 'tidy'
It makes severe complexity

Thanks (0)
avatar
By Chicm
29th Jan 2021 10:00

Thanks for the quick responses. My inityial thoughts are that GWROB affects Inheritance Tax and that is not what concerns me. It is only BIK I am concerned about. If someone says it affects BIK as well then that is obviously different.

Complexity isn't an issue for me either: it still looks pretty straightforward really.

Thanks

Thanks (0)
Replying to Chicm:
avatar
By Paul Crowley
29th Jan 2021 10:14

Easy to transfer

Complex to sort out the tax issues

Clearly need to pay rent at market rate or BIK or a bit of both

And adding an item in that would be CGT free to the CGT system inside a tax paying company

Thanks (0)
A Putey FACA
By Arthur Putey
29th Jan 2021 10:01

At the risk of not answering the question you asked, its one thing to put investment properties in the company but I would have thought that keeping the cottage in your own name would give you flexibility should you need it. You clearly have other assets (what do you live off?) so not everything you own will be in the company. Its simple enough to put it in your will along with the other stuff. Of course you might be thinking of reducing your assets to avoid them being eaten up in care home fees down the line, but that's another question, along with one about how lifetime gifts exemption applies when the gift is to a company.

Thanks (0)
avatar
By Chicm
29th Jan 2021 10:13

Yes that is right - not everything I own nor my primary income sources will be in the company. My goal is that my property assets will be held there for the kids. That's it. I have sufficient funds for any care home costs already.

I am not trying to avoid anything other than BIK in the short term. Inheritance tax is not an issue with respect to this either.

Thanks again

Thanks (0)
Replying to Chicm:
avatar
By leeanthonyblackshaw
29th Jan 2021 11:21

Are you aware that gifts to a company may need to be reported as chargeable transfers for inheritance tax (not potentially exempt transfers) or are you relying on para 4(3) of The Inheritance Tax (Delivery of Accounts) (Excepted Transfers and Excepted Terminations) Regulations 2008?

Thanks (0)
Replying to leeanthonyblackshaw:
avatar
By Chicm
29th Jan 2021 16:53

Yes I am aware but again, this is not an inheritance tax issue. Thanks for the response.

Thanks (0)
avatar
By Paul Crowley
29th Jan 2021 10:17

'I own a small cottage (my primary residence) and I would like to also gift that to the company – really just so that all my assets are in the one place and largely already owned/controlled by my children (just in case!)'

What does '(just in case!)' mean?
I know what 'estate planners' would read that to mean

Thanks (0)
Replying to Paul Crowley:
avatar
By Chicm
29th Jan 2021 10:21

Just in case I die suddenly!

Cynic... :-)

Thanks (0)
Psycho
By Wilson Philips
29th Jan 2021 10:18

Your company owns a property.

You live in the property.

You do not pay rent.

Assuming that none of the exclusions apply (job-related accommodation etc) you have a BIK.

There is a very simple way of avoiding that BIK - your accountant should be able to tell you how.

Thanks (0)
Replying to Wilson Philips:
avatar
By Chicm
29th Jan 2021 10:22

OK - thanks for your input.

Thanks (0)
Replying to Wilson Philips:
.
By Cheshire
29th Jan 2021 10:23

He doesnt want to pay an Accountant though.

Wants to get it for free on here from several Accountants.

Thanks (0)
Replying to Cheshire:
avatar
By Chicm
29th Jan 2021 10:32

Again - cynic... :-)

If you don't want to answer the question then don't. No problem either way.

It says on the top Any Questions - it doesn't say Only ask questions that could be answered for free.

If you want to quote me a cost for your "expertise" in this area, PM me with your qualifications and I'm happy to pay...if indeed you do know what you're talking about that is.

Thanks (0)
Replying to Chicm:
Psycho
By Wilson Philips
29th Jan 2021 10:49

Chicm wrote:

Again - cynic... :-)
It says on the top Any Questions - it doesn't say Only ask questions that could be answered for free.


In "How to use Any Answers" it also says:
Please note that the people who answer are often professionals who are sharing their expertise for the greater good of the community. They are not here to provide free accounting advice. and
If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.
Thanks (0)
Replying to Wilson Philips:
A Putey FACA
By Arthur Putey
29th Jan 2021 10:55

But if we frighten "the public" away we will be left with a dull accountants forum (perhaps in both senses!)

Thanks (0)
Replying to Arthur Putey:
avatar
By Tax Dragon
29th Jan 2021 11:01

Arthur Putey wrote:

But if we frighten "the public" away we will be left with a dull accountants forum (perhaps in both senses!)

Bring it on!

Thanks (2)
Replying to Tax Dragon:
RLI
By lionofludesch
29th Jan 2021 12:04

Tax Dragon wrote:

Arthur Putey wrote:

But if we frighten "the public" away we will be left with a dull accountants forum (perhaps in both senses!)

Bring it on!

[chuckle]

Thanks (0)
Replying to Arthur Putey:
avatar
By Chicm
29th Jan 2021 11:04

How do you know I am not a dull accountant?

Thanks (1)
Replying to Chicm:
RLI
By lionofludesch
29th Jan 2021 11:12

Chicm wrote:

How do you know I am not a dull accountant?

By the questions you ask.

Thanks (5)
Replying to lionofludesch:
avatar
By Tax Dragon
29th Jan 2021 12:15

lionofludesch wrote:

Chicm wrote:

How do you know I am not a dull accountant?

By the questions you ask.

:-)

Thanks (0)
Replying to Chicm:
A Putey FACA
By Arthur Putey
29th Jan 2021 11:29

If you were you'd have masqueraded as one and framed the question "My client is considering ......"

Thats's what everyone else does when the question is about themselves.

Thanks (1)
Replying to Wilson Philips:
avatar
By Chicm
29th Jan 2021 10:58

So I am taking "for the greater good of the community" to be the operative phrase here.

You don't have to answer if you think I am fishing for freebies. Again - PM me with your fees and expertise as a professional and we can go from there.

Thanks (0)
Replying to Chicm:
A Putey FACA
By Arthur Putey
29th Jan 2021 10:54

If you like spending time here you'll see there is a thread about cynical accountants. There is an overriding caveat that nothing said here consitutes advice that you should rely on, but it does tend to be repeated every time someone asks a question. Maybe the Any Answers section of the site needs a banner to that effect.

I have had helpful responses from folk on DIY and motoring forums without anyone suggesting I was a freeloader.

Thanks (1)
Replying to Arthur Putey:
avatar
By Chicm
29th Jan 2021 10:59

That sums up exactly how I approached this.

Thanks (0)
Replying to Chicm:
.
By Cheshire
29th Jan 2021 10:58

Yes Im a cynic. Dealing with a certain section of society doing this job makes you thatway. Funnily enough there was a post on this the other day.

Frankly I am completely fed up with non Accountants asking for free advice on an Accountants forum that is for Accountants. So whilst I do not wish to answer the question in this instance, I do have a right to make a comment.

If you dont want to hear what I said, then take your own advice and dont comment.

I wouldnt quote. You didnt ask for a quote. You asked for free advice.

We all know what type of clients folk looking for free advice make, which is why you will not get many people Sending you PMs with a quote, although you might from one or two of the desperate ones.

Thanks (0)
Replying to Cheshire:
avatar
By Chicm
29th Jan 2021 11:02

My thread - my right to comment on what anyone says on it. I don't comment on your threads but if I did I would expect an equally robust response.

I'd be fed up too if I felt exploited by non-accountants - but you have no idea who I am or what my experience and expertise is.

Thanks (0)
Replying to Chicm:
.
By Cheshire
29th Jan 2021 11:08

IF you are any kind of Accountant, then put forward your thoughts, cite legislation and then we can all have a proper discussion.

''my thread - my right'' - you will find that thought is quite misguided.

Thanks (0)
Replying to Cheshire:
avatar
By Chicm
29th Jan 2021 11:55

Troll...

Thanks (0)
Replying to Chicm:
RLI
By lionofludesch
29th Jan 2021 11:35

Chicm wrote:

My thread - my right to comment on what anyone says on it. I don't comment on your threads but if I did I would expect an equally robust response.

I'd be fed up too if I felt exploited by non-accountants - but you have no idea who I am or what my experience and expertise is.

Typical.

First day on here and throwing his weight around, dictating what folk who have been members for donkey's years can or can't do.

Thanks (2)
Replying to lionofludesch:
avatar
By Chicm
29th Jan 2021 11:55

Troll

Thanks (0)
Replying to Chicm:
RLI
By lionofludesch
29th Jan 2021 12:05

Chicm wrote:

Troll

Here we go ............

Thanks (1)
Replying to lionofludesch:
.
By Cheshire
29th Jan 2021 12:12

Another satisfied customer. Where do I pay that royalty payment?

Thanks (2)
Replying to Cheshire:
A Putey FACA
By Arthur Putey
29th Jan 2021 11:14

Bit harsh. Its for the site owners to determine who is allowed to contribute. Of course, you raise the old chestnut of why, when it is positioned as a resource for accountants, are "the public" allowed. But that's not the OPs problem.

Neither is Aweb a site for getting quotes from accountants. If someone posted "can you give me a quote for X" they would be deluged with replies from all over the country based on limited facts.

Thanks (1)
Replying to Arthur Putey:
.
By Cheshire
29th Jan 2021 11:46

Harsh. I dont think so, are you a big softy really Arthur?

''not the OPs problem''. Perhaps not. Should we keep encouraging it? No. Its a problem for the Accountants on here.

Besides keep giving freebie answers on partial questions is not helping to stem the rising tide of 'why should we pay for an Accountant/ its a really simple, straighforward question' brigade.

Keep giving to such folk, they keep coming.

Agree about the quotes. Although one or two folk do come in here looking for such. Some Accountants on here do even not respond in any way shape or form on 'Any answers' but just PM folk offering to quote (apparently....there was mention of a couple of cases a few months back). Plus Sift seem to think we all do/want to do that, from John's comments in that ridiculousness that happened a little while back.

Thanks (0)
Replying to Wilson Philips:
A Putey FACA
By Arthur Putey
29th Jan 2021 10:33

We know its a family company in which he is not the majority shareholder but we don't know whether he is a director.

Thanks (0)
Replying to Arthur Putey:
avatar
By Chicm
29th Jan 2021 10:37

Yes - I am a Director...hence why I am asking about BIK which is a Director charge...

Thanks (0)
Replying to Chicm:
RLI
By lionofludesch
29th Jan 2021 10:43

Chicm wrote:

Yes - I am a Director...hence why I am asking about BIK which is a Director charge...

Not necessarily. Any employee can have a BIK.

Thanks (0)
Replying to lionofludesch:
avatar
By Chicm
29th Jan 2021 10:45

Yes - that is correct. I wasn't excluding employees - just confirming that I am a Director - hence the potential BIK liability. I assumed you thought I may be a shareholder only.

Thanks (0)
avatar
By Tax Dragon
29th Jan 2021 10:32

@Wanderer

These threads depress me. Can we not talk about them on your thread?

Thanks (0)
Replying to Tax Dragon:
avatar
By Tax Dragon
29th Jan 2021 11:50

No worries, Wandsie, I've said my bit below now.

Thanks (0)
Replying to Tax Dragon:
avatar
By Wanderer
29th Jan 2021 16:44

Sorry, TD I've only just looked at this thread.

Answer is NO, that's my thread, I have the right to control any and all answers! If anyone doesn't agree I'll, I'll I'll (er what can I do), I know:-
https://www.youtube.com/watch?v=ttGQZyCmVpk

Thanks (0)
Replying to Wanderer:
avatar
By Chicm
29th Jan 2021 16:56

Troll

Thanks (0)
Replying to Chicm:
avatar
By Wanderer
29th Jan 2021 17:02

Bless, that really winds me up, I'm really hurt that you've trolled a troll with a troll accusation. Actually I've just reflected and don't care a bit. Unfortunately you've totally missed the point of my post. Anyway this thread is likely to be locked shortly and you banned. Good luck for the future, it's been emotional.

Thanks (2)
RLI
By lionofludesch
29th Jan 2021 10:32

You're happy to throw away your Capital Gains Tax relief, Chicm?

Just checking.......

Thanks (0)
Replying to lionofludesch:
A Putey FACA
By Arthur Putey
29th Jan 2021 10:35

Isn't PPR available on a gift?

Thanks (0)
Replying to Arthur Putey:
avatar
By Chicm
29th Jan 2021 10:44

Thgat is my understading. It is my private residence - indeed my only residence - so my understanding is that CGT would not apply because of this.

Thanks (0)
Replying to Chicm:
A Putey FACA
By Arthur Putey
29th Jan 2021 10:59

Whats the property worth, what will it cost the company in SDLT?

Thanks (0)
Replying to Arthur Putey:
RLI
By lionofludesch
29th Jan 2021 11:10

Arthur Putey wrote:

Whats the property worth, what will it cost the company in SDLT?

Nothing. LBTT is a different matter, though.

Thanks (0)
Replying to Arthur Putey:
RLI
By lionofludesch
29th Jan 2021 10:45

Arthur Putey wrote:

Isn't PPR available on a gift?

I was thinking about the future, not the present.

This is a Scottish company, by the way. Just in case it becomes relevant.

Thanks (0)

Pages

Share this content