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Rent from boyfriend

Rent from boyfriend

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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.

Replies (16)

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By andy4151
15th Feb 2013 12:02

I cant believe this would constitute rental income. Surely it is just sharing the cost of general living costs? Food, Utilities etc

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By George Attazder
15th Feb 2013 12:29

I agree

It's not taxable, but your client should probably take legal advice, as the boyfriend (who now seems to be effectively paying all the bills) might become entitled to a share in any proceeds from the sale of the property

Incidentally, when I first saw the title of your post, I thought we were talking about girlfriend rental, which is taxable (and VATable).

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Replying to donc0312:
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By GSPANESER
15th Feb 2013 13:26

Girlfriend rental...mmm.

George Attazder wrote:

Incidentally, when I first saw the title of your post, I thought we were talking about girlfriend rental.

 

Didn't have you down as a Facebook fiend, George! ;P

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Replying to SteveHa:
Quack
By Constantly Confused
15th Feb 2013 16:28

!

GSPANESER wrote:

George Attazder wrote:

Incidentally, when I first saw the title of your post, I thought we were talking about girlfriend rental.

 

Didn't have you down as a Facebook fiend, George! ;P

Oh I completely misunderstood what he meant there!

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Replying to donc0312:
By helen_r
15th Feb 2013 19:18

I agree

George Attazder wrote:

It's not taxable, but your client should probably take legal advice, as the boyfriend (who now seems to be effectively paying all the bills) might become entitled to a share in any proceeds from the sale of the property

Incidentally, when I first saw the title of your post, I thought we were talking about girlfriend rental, which is taxable (and VATable).

She needs to be very careful as to the legal implications of his 'rent' being so high. Would it even be viewed as being 'rent', legally?

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Mark Lee 2017
By Mark Lee
15th Feb 2013 13:27

exempt under Rent a Room relief too

.

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Euan's picture
By Euan MacLennan
15th Feb 2013 13:57

Rent a Room?

Am I missing something?  Two questions:

How does £1,000 a month of income from the lodger escape tax when the annual threshold is £4,250?Does Rent a Room relief apply when the lodger is not occupying a separate room, but sharing with the homeowner?

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Replying to jan.wolfsbergen:
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By zarathustra
15th Feb 2013 15:50

What would the correct description of this arrangement be?

Euan MacLennan wrote:

Am I missing something?  Two questions:

How does £1,000 a month of income from the lodger escape tax when the annual threshold is £4,250?Does Rent a Room relief apply when the lodger is not occupying a separate room, but sharing with the homeowner?

Lodger with benefits?

 

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Mark Lee 2017
By Mark Lee
15th Feb 2013 14:18

oops. Thought it £400 a month

And that would be above the limit anyway.

Haven't checked the detailed leg'n for a while.

Slinks back to desk resolving to remain OUT of giving tax advice any more......

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By George Attazder
15th Feb 2013 15:54

Sugar...

... Daddy?

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By pawncob
15th Feb 2013 16:16
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By George Attazder
15th Feb 2013 16:37

Eh?

What who meant where? My comment was supposed to be a prostitution reference, no idea what the Facebook friend is all about!

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Replying to tom123:
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By GSPANESER
18th Feb 2013 10:12

It's about this....

George Attazder wrote:

What who meant where? My comment was supposed to be a prostitution reference, no idea what the Facebook friend is all about!

 

George Attazder wrote:

Incidentally, when I first saw the title of your post, I thought we were talking about girlfriend rental, which is taxable (and VATable).

 

I.e. Not the prostitution part, but girlfriend rental bit....

http://www.bbc.co.uk/news/technology-21446368

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By George Attazder
18th Feb 2013 10:59

Ah I see...

... happy to report that you won't find my rented girlfriend or I on Facebook!

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By justsotax
18th Feb 2013 11:05

Is it rent...

has the boyfriend signed a contract....has a deposit been put down, an inventory check made....really is this how sensitive we are to avoidance/evasion etc.

 

It works both ways.....if in this case there was a 'loss' would you be planning to claim it against any other associated rental profits (if there were some)...or would you view it as contrived and therefore not seek to claim....I suspect the latter on the balance of the info.    

 

 

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By helen_r
19th Feb 2013 21:31

Is it possible?

Is it even possible for such a payment to be treated as rent? I'd have thought that up to a certain point it would be treated as being the boyfriend paying his share of household bills etc, and that anything over and above his fair share would be treated as being contributions towards the mortgage?

If I was her, I'd check the legal position just in case they split up and he claims that he's been contributing to the mortgage and thus owns a share of the property.

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