UK Property income £1000 tax relief

[Kookerburra]

Our son operates his self employed business from our home, he lives here too, can my husband and I (jointly owned property) charge him £2000 per year rent and class this as the individual £1000 property tax relief?

If we can, can he put the £2000 rent through as business expenditure and also claim the flat rate working from home business expense?

Any help appreciated.

 

[Fidget]

As joint owners, you both have an allowance of £1000 each. But, my understanding of the allowance is that it is not available if the income it is being set against derives from the trade of a connected person.

You might want to clarify directly with HMRC.

 

[Kookerburra]

Thank you I had read something about close connection, but then on another website this specified spouse or civil partner. Thanks for your help though

 

[Fidget]

You're welcome. I know it's a relatively new allowance, but when HMRC blurb mentions "connected person"... this is usually what is meant by it:

• spouse or civil partner
• brother and sister
• ancestors
• lineal descendants
• spouse’s or civil partner’s brother and sister
• spouse’s or civil partner’s ancestors
• spouse’s or civil partner’s lineal descendants

So, as you can see, it doesn't really leave much room for manoeuvre.

 

[Kookerburra]

That's really helpful, thanks.

Do you know if this connection rule applies to the £1000 trading allowance? He pays his brother (17yrs )and sister (14 yrs) a little bit of money on odd occasions when they help him out, it wouldn't exceed the £1000 pa.

Thanks

 

[Fidget]

The connected person thing doesn't matter for the trading allowance on the face of it. That allowance is all about overall expenses - if they're under £1000 then it might be worth claiming it, but best to crunch the numbers in respect of claiming or not claiming it, to see which option is the best.

But, there is another, across the board rule, when it comes to sole traders employing people. So if you employ a connected person and pay them more than the going rate for whatever it is they're doing, then only the going rate would be allowable as an expense. So that could potentially affect whether or not to claim the trading allowance. If it's only a couple of quid here and there to brother/sister, then it probably won't matter, but worth bearing in mind just the same.