One of my clients split up from her partner. He now lives in the flat she used to rent out. He pays her a sum of money every month to cover rent and child maintenance although they have never agreed what proportion is rent and what is child maintenance. Are there any rules about how much it should be ie market value or can they agree the rent is the same as her costs so that there is no tax to pay? There is no rental contract.
There needs to be a commercial agreement in place otherwise everything may be judged to be for the maintenance of the children.
Now extrapolate that.
If the property is let for below market value then expenses against the property are restricted, so, imagine the arguement that everything is being paid for the children (as such will be deemed in the absence of a commercial agreement) then nothing (including your fee's related to the property) would be an allowable expense as the property fails the wholly and neccessary test for being a business asset.
Your client needs to have a proper commercial agreement in place or she risks losing the tax benefits of ownership of the property.
Just to emphasise, as stated above. If the rent is less than the market rate (use previous income levels from the flat as a start point and then compare to other similar property rental levels) then the previously allowable expenses would be reduced by the same percentage (which may be 100%).
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
It would be on commercial terms so I see no reason why not
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
