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Letting to a connected person

Joint letting

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I am aware that when letting to a connected person, expenses are restricted to income so a loss cannot arise.

But suppose an unmarried couple jointly let at a cheap rent to the daughter of one of the couple.  Is the connected person's share of the expenses restricted as above but the other person's share of expenses not subject to the restriction?

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Scooby
By gainsborough
30th May 2020 08:55

I believe the expenses would still be restricted for the non-relative.

From memory, I think the issue is more to do with the fact the letting is no longer wholly and exclusively for the purposes of the rental business, as part of the reasons for letting are to provide a friend/relative with a place to live, rather than just letting to a connected person - it used to be ITTOIA 2005 s272 but not sure what it is now....

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Replying to gainsborough:
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By bernard michael
30th May 2020 09:19

I have similar query about letting to a divorced wife by her ex husband. Does the connection automatically stop on divorce? In this case the rental's part of the divorce agreement

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Replying to bernard michael:
Scooby
By gainsborough
30th May 2020 10:21

Still think that would be viewed as non-commercial. PIM2130 (mentioned by Wilson Phillips below) gives the example of a property being rented to relatives, friends, staff and business associates, so it is not family connection that is necessarily relevant here.

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Replying to bernard michael:
Psycho
By Wilson Philips
30th May 2020 10:23

As pointed out, it is not the connection per se that is the problem. Letting to a connected person on commercial terms should not present any problems.

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Psycho
By Wilson Philips
30th May 2020 09:08

What’s more relevant is not the connection but the non-commercial aspect.

At least, that’s what HMRC think - PIM2130

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Replying to Wilson Philips:
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By Tax Dragon
30th May 2020 09:54

My recollection is that HMRC speaks as if allowing expenses up to the level of income is almost a concession. I agree with the conclusion about no allowable loss, but it's hardly concessionary to say there's no taxable income.

Questions have been asked in here about mortgage interest on uncommercial lets. I don't recall any consensus being reached, but similar principles surely apply.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
30th May 2020 10:24

Is the mortgage interest point not largely academic now, at least as regards residential lets?

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Replying to Wilson Philips:
RLI
By lionofludesch
30th May 2020 11:13

No. If you're a basic rate taxpayer there's hardly any change. In fact, you can be better off if your income's close to PA as you can carry excess interest forward instead of wasting it.

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Replying to lionofludesch:
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By Tax Dragon
31st May 2020 11:15

I think that was the type of issue that was raised. You couldn't carry a loss on one of these lets forward; can you really carry forward surplus interest?

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By John Stone
30th May 2020 12:10

Thanks everybody for pointing me in the right direction.

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