ChatterBank0 min ago
tax avoidance?
I have a tenant in my buy-to-let property. He is a very good tenant and I would like him to continue renting from me but he is thinking he will have to leave as he is now struggling to meet the rent payments. I would consider reducing his rent because my mortgage repayments on the property have come down considerably. If I reduced his monthly rent by, say, £150, this would mean that at the end of the year, my income tax liability would proportionately reduce. (not by a huge amount).Would the tax people consider that to be tax avoidance, but legal? Or would it be illegal? Any tax experts out there?
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For more on marking an answer as the "Best Answer", please visit our FAQ.Thanks cathfromsaron - I thought about a sort of "exchange" deal such as you suggest, but I know how HMRC can come down on you if they suspect any kind of tax evasion, or tax avoidance which falls outside of their "permitted" rules! But who the blazes knows what they will or won't accept - until it's too late!!
It's not tax evasion to reduce your charges in order to keep a valued customer, any more than it is if Marks & Spencer drop the prices on an item to sell it. Carry on, the Revenue won't care.
However, do NOT ask him to do some maintenance to make up the difference. Well you can do if you like but you'd have to value the work done and include it as rent and pay tax on it.
However, do NOT ask him to do some maintenance to make up the difference. Well you can do if you like but you'd have to value the work done and include it as rent and pay tax on it.
As has been said you are not breaking any rules by reducing the rent but be careful mortgage payments can go up as well as down. The local housing allowance which is the maximum LA will usually pay on Housing benefit have gone down in many areas of the country recently, which often means tenants contributions increase, but represents the general reduction in rent charged.
If your tenant is paying rent under an assured tenancy I suggest you do not reduce the rent before the fixed period, usually six months, has expired then write to the tenant and provide him/her with the new rent and the date of commencement.
If your tenant is paying rent under an assured tenancy I suggest you do not reduce the rent before the fixed period, usually six months, has expired then write to the tenant and provide him/her with the new rent and the date of commencement.