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Discount on house purchase price in lieu of rent

My client bought a house (arms length transaction) but the seller's new house was not ready for occupation.  My client rented the house back to the seller for a nominal £1 pcm for 12 months under a formal tenancy agreement.  The market rent was £2500 pcm.  The purchase price of the property to my client was reduced by £30000, that is the £2500 market rent over 12 months. Am I correct in thinking that, for income tax purposes, the full market rent is chargeable as rental income on my client?

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By ms998
09th Nov 2018 14:55

Why do you think you have to charge market value to income tax? What legislation supports this?

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09th Nov 2018 15:17

Presumably the presence or absence of "incriminating" records might be relevant? eg, If original plan was to charge the full rent and then pay the full price. No idea if that would affect the tax treatment, such is my limited current knowledge. If the numbers are the same (discount = rent foregone) it obviously invites scrutiny.

How was the "deal" described in correspondence and discussions?

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09th Nov 2018 15:58

No.

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By frankfx
10th Nov 2018 14:20

Overheard in Harrods Champagne Bar.

- I 'd like to buy your penthouse

- Yours for £30m

- Done

- Ah , but I am buying a super yacht. Delivery in 12 months . I Need a land base, along with a wedge of ££'s to luff - up the mainsail.

-No problem, how about I pay £27m. and I take delivery of (my) penthouse in 12 months ?

-I'll get my lawyers to draw up a contract.

-There will be a peppercorn rent and some minor obligations…. don't want you running of with the chandeliers.

No rent here.

Arms length transaction.

- Waiter another bottle of the Moet please .

- Put it on my account...…………...

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