Property Let- options for tax relief on losses?
Posted on 24th February 2017 at 09:36
This post is providing a scenario as an example to explain the matter.
Here is an example:
A client has bought a flat that is being let to her daughter. She has started working but it's a low paid job and therefore my client helps her by lowering the cost of rent so now it falls below the market rent. As a result of this she should expect her mortgage interest and other expenses to exceed the rents received. So what options are available for tax relief on losses?
Property business expenses must pass the familiar test of being encountered exclusively for the purpose of the business in order to be deductible from rental income tax purposes. HMRC believe that if the property is let to a relative at less than the market rent then the related expenses are encountered partly for generous reasons, so fail the entire test. HMRC will allow a deduction up to the amount of rent received for the property, but no expenditure should be allowed as a deduction against the rental income. To round this up the client will not have a loss eligible for tax relief and she won't be liable to tax on the income from her daughter.
Tagged as: tax relief
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