Should I let to family through my limited company?

Should I let to family through my limited company?

9:43 AM, 29th May 2020, About 4 years ago 26

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As the title suggests, I’m considering getting a BTL via a limited company with the intention of letting it to family – who would claim housing benefit. The family already lives in a council flat and benefits from getting housing benefit.

The council flat is not fit for them anymore and I thought instead of council placing them in accommodation (which would be an AST and at risk of being temporary) I can provide a more stable home with no intention of eviction.

Is there anything I need to consider, legally or financially, or is this simply another BTL via LTD Co.? I appreciate the risk of non payment and any risk of arguments arising from working with family.

Many thanks

Jay


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Comments

Kate Mellor

17:45 PM, 30th May 2020, About 4 years ago

Bill Irvine is the expert on Universal Credit, he runs educational courses on the subject for the RLA (one of which I have attended), so you can take his word as gospel on that subject!

As others have said, if you are borrowing for the purchase you may have a problem with the mortgage terms. The other issues are all personal and that is your decision to make. Just ensure that EVERYTHING you do is to the letter of the law in case things do go south, as they can with any tenant.

Puzzler

21:30 PM, 30th May 2020, About 4 years ago

Reply to the comment left by Bill irvine at 30/05/2020 - 11:33
Very amusing you have capitalised "Trumping"

I wish I had had this information previously, my relation was turned down flat by their local authority. This was several years ago, though.

Badger

11:33 AM, 31st May 2020, About 4 years ago

Letting to family is so fraught that I would strongly advise against it under any circumstances.

We let one of our properties to a niece once. The problems began almost immediately. Amongst other things, she let her rabbit run free with the inevitable consequences for the carpets - which required expensive replacement as a result! Fortunately, she decided that she wanted to move out in pretty short order for various reasons. With hindsight we consider ourselves lucky but the resultant trauma surrounding the whole thing coloured family relations for some years.

Later, we made the same mistake again with another family member (and in the same property!). This one ended much less traumatically, but relations were still soured - albeit in a much more minor way than the first time around.

Bottom line: my advice - just don't do it. Tempting though it is, the dangers of something going wrong are just too high and are not worth the risk.

Jessie Jones

12:00 PM, 31st May 2020, About 4 years ago

Never let to friends or family. I let to a friend, and the chain of events that followed were worse than I could have possibly imagined.
The fact that they are on benefits suggests that they already don't have surplus money. Either you charge them the full rent, or you let them off a little. In the second case, HMRC no longer recognise your maintenance and mortgage costs as tax deductible against the income as it isn't a proper business, and you will be liable for tax against the entire rent.
Similarly for DSS rental income. If your tenants cannot prove that they pay you the full market rent every month, then the DSS will stop the payments. And where does that leave you?
You would be better advised to purchase a BTL and let it out on a purely commercial basis, and use the profit to help your relatives out.
But your replies to earlier advise suggest that you have already made your mind up, so good luck, and I hope I don't see you back on here seeking remedies for the pickle that I anticipate coming your way 🙂

jaylondon

10:50 AM, 1st June 2020, About 4 years ago

Reply to the comment left by Bill irvine at 30/05/2020 - 11:33
HI Bill,

Really appreciate all your input. I will go through the links and get in touch with the council at once.

Thanks again.

Puzzler

16:27 PM, 2nd June 2020, About 4 years ago

Let us know how you get on, good luck

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