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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 40 years experience as a qualified accountant (UK based Practitioner)
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My sister is paid in kind by having free accommodation that

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My sister is paid in kind by having free accommodation that would normally be let out. In return she manages my parents holiday flats. Is this tax deductible?

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Thank you for your question..

If this is a private arrangement between your parents and your sister and no money changes hands, then the arrangement is out of scope of income tax.

Please expand on what you mean by .. Is this tax deductible?

Many thanks

Customer: replied 2 months ago.
I am helping out with their tax return. Just taken over from an accountant who they've been with vor 60 years. The business doesn't support the fees any longer. My sister is enrolled as an employee but instead of being paid she receives full use of the flat including all expenses. If she didn't live there it would be let as a holiday flats and has therefore got a value attached to it. Also, they need someone to help them run it so they'd have to get someone else in. Can I show it as wages / expenses?.

Thank you for your reply.

If your parents wish to show a notional charge as a real charge/cost, they would have to translate the loss of rental income into real income. This would mean the profit stays the same but both income and expense are grossed and your sister pays tax on the supposed salary.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 months ago.
they would show it as income and then the corresponding amount as an expense so they would cancel each other out? In essence she is "renting" it and then they are paying the rent back to her as salary. So there is no value in showing that. She would just need to tell HMRC that she is being paid in kind an amount and pay any tax due on that?. (Non because it below the personal allowance). I think it is more so she gets NI credit for the work she does.

Thank you for your reply.

She needs something in writing to state what the salary is so it can be shown in the books.

What you are suggesting is a single entry in her books (supposed salary received). Saying HMRC that she was being paid in kind is not enough in my considered view. You can't get NI credit if you have no income.

You should be showing both income and expense in the business books and she shows income on her tax return albeit the figure is covered by her personal allowance.

I hope this is helpful and answers your question.

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