Tax on income when no proof of rent

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    Tax on income when no proof of rent

    Hello, my brother bought our parents house from them as they had suffered some major financial problems and he didn't want to see them have to sell up and go into a council place. He agreed to buy their property (with a mortgage) and live there with them and they'd pay enough rent to cover his mortgage.

    This arrangement worked well until he met a girl and bought a 2nd property with her (with another mortgage) about 3 years ago. This is now his main residence.

    Our parents continue to live in his old house, he has gained permission from the lender to rent it out. They continue to pay rent (his mortgage) on that property (although it went down a year or so ago so he is using about £100 of what they pay him pcm as overpayments on that morgage now). They are paying council tax and all the bills there.

    So he is in a situation where he's paying off the mortgage on his rented property with their rent. They did have a tenancy agreement in place initially, but this hasn't been renewed each year.

    I wondered what the tax implications are for him with this arrangement? He's not declaring this rent as income as he says he's not profiting in any way. I'm concerned that he'll get a nasty tax shock someday. Both his mortgage lenders know about the arrangement.

    There may come a time when our parents retire and will need to claim HB in order to stay there. He's said he'll consult an accountant then and said that in the meantime, if queried by the tax man he'll say they're just repaying a loan to him each month, it's not rent. He's aware that he'll have to pay CGT on it when he finally sells it.

    What do you think? I need some facts to give him really. Thank you.

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  • Reply to Is it an allowable expense or capital expense
    by AndrewDod
    Can't see any reason this would be an insured event. Agree it is not a capital expense at all....
    25-05-2022, 09:25 AM
  • Reply to Is it an allowable expense or capital expense
    by Another Fine Mess
    If you dont mind me suggesting, If your Insurance Company is rejecting your claim you could get in touch with a Chartered Loss Assessor who would argue with the Insurance Company Loss Adjuster, its worth a phone call to one.
    24-05-2022, 16:30 PM
  • Is it an allowable expense or capital expense
    by shipboard
    I rent out a single property, during the winter storms the brickwork was damaged and the cheapest option to repair it was to render the Gable end and rear of the property. I tried to claim on the insurance but they maintained it was due to wear and tear, I am of course disputing this. My question is...
    24-05-2022, 10:04 AM
  • Reply to Is it an allowable expense or capital expense
    by gnvqsos
    I think the insurance company were right-the render must have been distressed to suffer storm damage. You can offset cost against income.
    24-05-2022, 14:36 PM
  • Reply to CGT query
    by Gordon999
    Hmrc rules allow transfers between spouses without cgt. The recipient spouse takes on the asset at the original purchase price.
    24-05-2022, 11:16 AM
  • Reply to Is it an allowable expense or capital expense
    by Gordon999
    I agree with jpk : it is a maintenance expense which is claimed against rental income....
    24-05-2022, 11:12 AM
  • Reply to Is it an allowable expense or capital expense
    by jpkeates
    I'd say that's a maintenance cost and would be allowed against income.
    It would affect the value of the property, but only to restore it to the level that it was at prior to the damage (plus the general positive effect of any large maintenance work).
    24-05-2022, 10:53 AM
  • CGT query
    by vik238754
    Hello. Since 2013 my wife and I own a property as tenants in common where the beneficial interest split is 90% her and 10% me. We are now looking to sell the property. I have a large CGT loss and using the HMRC CGT calculator I have calculated that if I change the split to 70% me and 30% my wife...
    23-05-2022, 19:37 PM
  • Reply to CGT query
    by jpkeates
    What you are planning to do is routine and HMRC will accept the change as a matter of routine admin.
    24-05-2022, 09:13 AM
  • Any property tax experts you can recommend please?
    by mpppen
    Hello,
    We have a small BTL portolio of five properties. Some are in our personal names and the latter ones in a property company we set up a few years' ago when the tax rules changed.

    I'd really like to find someone who can advise us of the best way of either bringing the personal...
    03-03-2022, 20:00 PM
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