owners live in each others flat - are they renting ?

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  • owners live in each others flat - are they renting ?

    We manage a little block of flats where a brother and sister each own a flat. They live in each others flat and pay rent to each other - more tax efficient ????

    My question, do they need to abide by the CP12 & electrical regs or as they are paying a family member and dont have a rental agreement are they outside the regulations ?

    I thinkthey are bound to do CP12 and follow other regs, any ideas ?


  • #2
    Interested to know why it is tax efficent? Are they paying a peppercorn rent and claiming interest payment relief on their tax returns plus costs etc.

    Regardless of contract or not they are each tenants under a statatory tenancy legislation, so in theory each must meet the obligation of the legislation in place at the time. However in reality a breach can only be enforced if there is complaint and imagine as this tax arrangment is on the edge of the tax law they will no doubt be keeping their heads down.

    It sound like a cool plan but I suspect they would be busted in HMRC got wind of it


    • #3
      They should stop paying rent to each other. Otherwise HMRC will want their slice of the rental profits.


      • #4
        This arrangement runs the risk of them being clobbered with a capital gains tax bill on sale.


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