We have a client who has her flat under shared ownership whereby she owns 50% of the property and the shared ownership scheme owns the other 50% of the property, on which our client pays rent. The flat is our client’s home and is her only property.
Our client has monthly expenses relating to her flat in the region of £1,200 for rent, service charges, utilities & mortgage interest.
The rateable value of the property would indicate that the market rate rent for the whole property would be in the region of £2,000 per month.
The client’s boyfriend has moved in with her and he is paying our client £1,000 per month. Our client is therefore making a ‘profit’ of £400 per month.
Will the ‘profit’ of £400 per month be chargeable on our client as rental profits? Clearly the main reason for our client’s boyfriend moving in with our client is because they wish to live together rather than for our client to operate a rental business.
We have reviewed the HM Revenue & Customs Property Income Manual, but surprisingly there does not appear to be any commentary on the above issue, despite it appearing to be a common occurrence.
However, in the DWP’s manuals, there is a chapter regarding Social Security legislation which states that a couple who are living together as husband and wife should be treated in the same way as if they were married, with the principle behind this being that an unmarried couple should not be treated more or less favourably than a married couple.
It therefore appears unlikely that HMRC would interpret our client’s arrangement differently from the DWP, even though there does not appear to be anything from HMRC stating one way or the other.
Any comments and references to legislation or HMRC guidance would be gratefully received.