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In 2006 I bought a flat for my daughter to live in rent

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In 2006 I bought a flat for my daughter to live in rent free. In 2008 my elder daughter moved out and I transferred ownership of this property to another daughter who was starting university.
My daughter finished university in 2011, had a couple of casual periods of employment and started a family in 2012.
I never revised the ownership of the property and my daughter has been contacted by the HMRS for tax on the rent received in the interim.
I totally accept liability for any outstanding Tax accrued by my daughter - what is the best way forward to resolve this liability to HMRS?
Submitted: 7 months ago.
Category: Tax
Expert:  bigduckontax replied 7 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Unfortunately it is not and never can be your liability, that rests with the owner, your daughter.

The net rental ie rent after normal outgoings eg this list from Which:

'The most common types of expenses you can deduct are:

  • water rates, council tax, gas and electricity
  • maintenance and repairs to the property (but not improvements)
  • contents insurance
  • interest on a mortgage to buy the property
  • costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)
  • letting agents' fees
  • legal fees for lets of a year or less, or for renewing a lease of less than 50 years
  • accountant’s fees
  • rents, ground rents and service charges
  • direct costs such as phone calls, stationery and advertising for new tenants

The expense should be incurred wholly and exclusively as a result of renting out your property'

From this income can be deducted her normal personal allowance, the balance is then taxable at her marginal rate.

Of course you can settle her bill, but it still remains her income.

I am so sorry to have to rain on her parade.

Customer: replied 7 months ago.
Despite my daughter not earning enough to use up her personal tax allowance - the additional £5000 accredited to her income would have attracted a tax liability for at least a one of those years.However she and her partner claimed working/child tax credits for a further four years - how is this likely to impact upon their liability to the tax man?
Expert:  bigduckontax replied 7 months ago.

Those in receipt of Tax Credits must report any change in their circumstances to the Tax Credit Office within 30 days. Depending on the nature of the change the entitlement may be, in this case, reduced.

Customer: replied 7 months ago.
I guess the bot***** *****ne is, provide all the required information and wait for the bill - is it likely that any alternative course of action might reduced the overall liability - i.e. tax advisor, tax solicitor or am I 'hung by my own petard'?
Expert:  bigduckontax replied 7 months ago.

I regret so and the Tax Credit Office are always keen to pursue any over payments. I suggest that any further professional advice will prove more costly to obtain than would be recovered. Fees will be well into the three figures.

Customer: replied 7 months ago.
Appreciate your candid response - I've just got to bite the bullet - no more metaphors - thanks for your guidance
Expert:  bigduckontax replied 7 months ago.

Delighted to have been of assistance.

Please be so kind as to rate me before you leave the just Answer site.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3606
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 7 months ago.

Thank you for your excellent support.

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