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Rental income from child living in parental home

Rental income from child living in parental home

During a CPD training session the tutor asserted that an amount paid by a person to his parents for living in the parental home was income from land and property and consequently taxable under schedule A as rental income in the hands of the recipient.

Can anyone provide me with the facts to refute or confirm this assertion.
Raymond Lisle

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18th Oct 2004 13:06

Delicate flowers
It is rather pointless to censor the text now that everyone who is interested has read the posting and the thread has died its natural death.

As I recall, I said something like there were too many vindictive, envious, resentful, social misfits working in the Inland Revenue today.

That is no more than the truth and it is a major issue for those of us who have to deal with the Inland Revenue on a daily basis on behalf of clients.

You only protect the guilty by censoring the facts.

This is the second time you have censored
one of my postings recently. I suspect you have a hidden agenda to discourage me from contributing to AccountingWeb because you do not like my political views (which are evident from many of my postings) and do not want AccountingWeb used to disseminate them.

I can assure you, you will not succeed.

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12th Oct 2004 18:07

Given...
..the amount and quality of the services provided by most parents (at least, by mothers) by way of cleaning, laundry and meals etc, a more likely attack is that the income is assessable as from a trade under Sch DI, rather than Sch A.

Whatever the strict position is, there would be outrage if the Revenue ever attempted to pursue the point.

But, now that it has been advertised on TaxZone, we can be sure that it will be tried on by the ... Revenue ... (witness their disgraceful conduct in the recent s660A scandals). [Offensive comments removed 181004]

Having said that, I'm not sure why payments from an adult child over 18 should be treated differently from payments from an unrelated lodger in the same circumstances. And why shouldn't rent-a-room relief then be in point?

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18th Oct 2004 12:13

To John Sartoris: Offensive remarks removed
John, I have removed your remarks about people working in the Inland Revenue, posted on 12 October. Please keep to the issues.
Andrew Goodall
[email protected]

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By jcace
14th Oct 2004 11:04

Inland Revenue view?
Per IR87 Inland Revenue guidance on rent-a-room etc "Payments made by members of your family towards household expenses are not taxed." I'm not going to worry about what I paid my late mother, and her treatment of it for tax purposes, and I wouldn't expect anyone else to. I would imagine that in 99.9% of cases there isn't even a question to be asked.

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14th Oct 2004 11:39

IR 87...
...refers to 'payments towards household expenses'. But it would not be unusual for an adult child living at home to pay an amount in excess of his share of the actual expenses.

In which case the question of Sch DI trading profit could easily arise in the same way as it could for any other lodger.

How far does 'family' extend in this context? Would it include brothers and sisters,nieces and nephews, grandad and grandma, daughters and sons-in-law, unmarried spouses?

If the whole family were all paying more than just their shares of household costs, there would surely be a taxable trading profit to consider (especially as it is not obvious whether each person's share of actual expenses should be calculated on an average cost basis rather than marginal or incremental cost- cf Pepper v Hart).

Perhaps not such a silly question after all.

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12th Oct 2004 16:17

Ask the tutor?!
Well they wouldn't be classed as a "lodger" under the Rent-a-room scheme as they haven't been taken into the family home to share rooms where you would expect to find the "family". Is the child paying more than the Rent-a-room exemption anyway? (£354 per month!)I don't see how the Schedule A business rules would apply either unless the family live in/run a Guest House or something? So ask tutor to explain further - Oh and also ask what they think the allowable expenses would be including pre-trading expenditure!!
I could well be wrong in which case I'll be shopping my parents to the relevant authorities for the undeclared contributions I paid them some time ago!!

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12th Oct 2004 16:42

Defray expenses
You may need to fish around in the Revenue Business Income & Property Income manuals for more clearcut guidance, but I would take the view that the "rent" payments are only intended to defray the parents' household costs incurred in looking after and providing for the child, and that there is therefore no profit element assessable to Schedule A.

I hope that's the case, otherwise I'm in the same boat as Helen, and will have to explain to my Dad why he may have to pay back tax from 20+ years ago!

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