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Not market rent

Practical Issues
brightncheerful
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Not market rent

#221514

Postby brightncheerful » May 14th, 2019, 10:37 am

Scenario:

A (landlord) lets a property to B (tenant). (Although i don't think is relevant to my question, A and B are unconnected parties for HMRC purposes.)

Under the lease, the market rent is £10,000 a year. A gives B a side-letter rent concession at £8,000 pa.

Q1. As A is not receiving £10,000 pa, does A still have to pay income tax on £10,000 or is it only the £8000 that is taxable?

Q2: is there any tac advantage to a landlord in not charging the full £10,000?


tia
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PinkDalek
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Re: Not market rent

#221521

Postby PinkDalek » May 14th, 2019, 10:42 am

Q1 Taxable on £8,000 per annum.
Q2 Other than not paying tax on the conceded £2,000?

dspp
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Re: Not market rent

#221522

Postby dspp » May 14th, 2019, 10:43 am

What does it say on the invoice(s) ?

There is your answer I think.

regards, dspp

JonE
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Re: Not market rent

#221543

Postby JonE » May 14th, 2019, 11:48 am

dspp wrote:What does it say on the invoice(s) ?

There is your answer I think.


There'd certainly be an issue for B if A's business is reporting the actual amount received of 8k as rent receivable (documented by lease plus 'side-letter') while B's business was claiming outlay of 10k (per the lease but concealing the side-letter and its effects).

Cheers!

Lootman
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Re: Not market rent

#221584

Postby Lootman » May 14th, 2019, 2:46 pm

JonE wrote:
dspp wrote:What does it say on the invoice(s) ?

There is your answer I think.

There'd certainly be an issue for B if A's business is reporting the actual amount received of 8k as rent receivable (documented by lease plus 'side-letter') while B's business was claiming outlay of 10k (per the lease but concealing the side-letter and its effects).

I'm sure there are more nuanced ways to achieve the same outcome. For instance one of my sons owns and lives in a HMO and rents out the other bedrooms. Recently his girlfriend moved in and he told her that he would waive rent as long as she picked up some of the bills and/or paid for dates out.

It would be reasonable for what is effectively a house guest to chip in with expenses and so he is confident that this is kosher, tax wise. I am not aware that the UK taxes imputed rents although I read somewhere that France does.


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