Is this legal?

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    Is this legal?

    Hi all, I am completely new to this so wanted to get some informal advice. I currently jointly own a freehold property in London (with my sister that lives in the US) that I inherited from my mother many years ago. I do not live in the house, not does my sister; until now, the entire property was let via full management with an estate agent (the old tenants have since left, so place is now empty). My son would now like to live in the property and we are permitting him to do so rent free, so long as the other 3 bedrooms are occupied by paying tenants (we have a small HMO license already from local council)

    My son mentioned that we could take advantage of the rent a room scheme (£7500 tax-free), with a lodgers agreement being setup with my son being named as the householder (resident landlord) and thereby my son would declare the rental income on his own tax returns in order to benefit from this scheme.

    Would this be permitted? If he is declaring the rental income on his tax, would I still need to declare this too if he was also transferring the money to me and my sister further down the line?

    Thanks

    #2
    Originally posted by js21983 View Post
    ...

    Would this be permitted?
    Up to this part, the answer is sure, that's fine. But...

    Originally posted by js21983 View Post
    If he is declaring the rental income on his tax, would I still need to declare this too if he was also transferring the money to me and my sister further down the line?
    ... You're receiving income, whether directly from your tenants of 3, or from your son, I can't imagine why you wouldn't need to declare it to the tax authorities.
    I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

    I do not answer questions through private messages which should be posted publicly on the forum.

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      #3
      Your son is basically renting the property from you, so he can deduct the rent he pays you from his income, so you don’t end up paying tax twice.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        It's permitted, but is obviously designed to evade tax. You need to declare the income you receive from your son - and pay tax on it. What is he going to pay over to you - the full rent or more than he has actually received? For £1500 this is a lot of complications and your son becomes a landlord with obligations they probably have no idea how to meet.

        It also seems unfair on your sister that she is deprived of part of her lawful rent to benefit your son.

        Comment


          #5
          If your son (not an owner) is living there with two other people and without a tenancy agreement (and not paying rent himself), it is going to be a stretch to convince anyone that his co-habitants are in fact lodgers. That will cause endless potential grief.

          I suggest either making your son a part owner, or giving him a formal tenancy agreement (and responsibility to pay full rent for the whole property at market rate) with a provision in AST that he can sublet.

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