Reply To: Income from Second Property that customer doesn’t own


This is a type of rent to rent arrangement i.e. your claimant rents a property she does not live in and then relets it to a different tenant.

This is more common than you might think. If you have seen any of the “make a fortune from property” seminars being advertised in the press / on line then this is one of their strategies i.e. you rent a property for £600 and then relet it for £800. You make £200 profit. Easy money. This is a major issue in London where large properties are let and then subdivided into small areas and the latter are let out to foreign students and so on…..often making thousands a week.

Here the claimant is saying that she also makes a profit….her rent is lower than it would be otherwise. That is her profit. HB is based on that lower rent of course.

So why would the landlord do this? Possibly for tax reasons esp if they live abroad. Or mortgage restrictions. It could be other reasons but probably tax. Nothing is in their name is it…council tax, amenities and so on.

I can understand the assessors decision. Your claimant is in receipt of other income that is of a somewhat dubious nature. Fair enough to explain the position but does your claimant realise that she is liable for tax on this arrangement or at least that she MUST declare the income / expenses from the property to hmrc. Secondly that she is personally liable for the normal landlord responsibilities because she has become the landlord (of the sub tenant).

I suspect if you ask her all this your claimant will look at you blankly. To her it is probably just a good way of saving a few quid but unfortunately it is a lot more complex than that.

So I would start by asking her about whether she has declared herself to hmrc as a landlord and so on. I guess she will come back and say she did not realise the implications etc. Then what you decide to do is up to you. She should be providing you with profit and loss accounts from her landlord “business” but again you will probably get the “all I am doing is” response.

My guess is that most tribunals will uphold the assessor decision…..or at least tell the claimant that she needs to formalise the arrangement and provide proper accounts etc.

I can hear you sigh…..