Student lets tax penalty for offspring?

by Readers Question

16:22 PM, 3rd October 2016
About 2 years ago

Student lets tax penalty for offspring?

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Student lets tax penalty for offspring?

A letting agent has just told me that there are new tax implications to having one’s student offspring living in a student property that I own in a university town. Has anyone come across this?penalty

Many thanks.

Deepak



Comments

Scott Scott

12:09 PM, 4th October 2016
About 2 years ago

Did they offer any explanation?

Deepak Rajput

12:27 PM, 4th October 2016
About 2 years ago

Reply to the comment left by "Scott Scott" at "04/10/2016 - 12:09":

Unfortunately not has its come to me 'through the grape vine' so to say.

Kate Mellor

16:34 PM, 4th October 2016
About 2 years ago

The only thing I can find isn't new, it's set out in a TAXINSIDER article from July 2011 and relates to the ability to claim expenses on property let to 'connected people' (ie your children) at less than market rent. Is it possible that this may be what they were referring to?

In basic terms, if you are claiming your expenses on a property as an income producing vehicle and have a 'connected person' (as defined by HMRC) living there for free, or at below market rates this will affect the amount of expenses you can claim against your tax.

https://www.taxinsider.co.uk/659-Renting_Property_to_Connected_People_Below_Market_Value.html

Scott Scott

17:46 PM, 4th October 2016
About 2 years ago

Is the property owned by you or a Ltd Co?

Deepak Rajput

18:10 PM, 4th October 2016
About 2 years ago

Its personally owned. Does it being owned by an LTD make a difference?

Yvonne Francis

15:03 PM, 5th October 2016
About 2 years ago

Reply to the comment left by "Kate Mellor" at "04/10/2016 - 16:34":

Hi Kate
In reply to your informative link how exactly could HMRC know if you let to a 'connected person' if the percentage of lost rent was not to great. For instance a loss of 20% if in a house of five sharers.
When as a sole trader I fill in my tax returns HMRC only want to know the gross rent and not to whom I have let.
This may be the law but how difficult is it to implement?
I know that companies who let to 'connected persons' are liable to an 'Envelope Tax' if the house is worth £500.000, but company accounts are far more detailed.
I do wonder if the agent is more concerned with the loss of his percentage.

Kate Mellor

15:34 PM, 5th October 2016
About 2 years ago

Reply to the comment left by "Yvonne Francis" at "05/10/2016 - 15:03":

Quite true Yvonne, in the case of a single room in a shared house this is most unlikely to ever come to light unless you had a full tax audit carried out.

It's more of a problem when people purchase a property for a family member to occupy for free or at a significant discount meaning it was not really purchased primarily as an income producing investment and the figures would look wrong on the return.

This was the only thing I could find that seemed to relate to the scenario Deepak was asking about, although again, it isn't a new thing...


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