Tax issues with charging below market rent to help a relative?Make Text Bigger
Can anyone think of any potential tax or legal implications with letting out a property at below market rent to help a close relative?
I would of course put it all on a formal basis having no desire for a family relationship to sour due to financial reasons!
A close relative has recently returned after 7 years abroad. They have no credit rating, having left the UK as a young adult and lived in a country with a “closed” currency. In order to help until they have built up a credit rating, I am in a position to purchase a property on a BTL mortgage, and let it to them at a rent equal only to the mortgage payments. They would then be able to save for a deposit with the saving. I have no wish to make a profit from this relative, only to help until they have the 3 years credit rating the bank is asking for. There would be a time limit on the arrangement, which they know, being keen themselves to climb the property ladder.
Are there any legal or tax pitfalls awaiting us?
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