when doing a good turn leaves you out of pocket
 

:mad:
in 2017 "Emily" became homeless. My wife and I became guarantors
when she found temporary rented accommodation and we paid the deposit.

Emily did not have any security and the landlord could have evicted her "when ever they wanted". The place was not hers to do as she wanted.

In 2018 we bought "her" a house, let her keep the deposit from the rented place so she could spend it on decoration. She was to pay enough each month to cover mortgage and about £100 to £150 a month to put aside for repairs. We had electric and gas safety tests done. We have spent £200 having boiler repaired, goodness knows how much on solicitor and stamp duty.

Emily is on minimum wage or there abouts and finds it hard to save any money, some months she saves non.

When her car was written off she borrowed and then bought our spare car. It was sold to her at a loss. That too has now been written off in a second hit and run. She has bought another second had car.

Emily is safe in the knowledge that if she is unable to work for any reason my wife and I will cover the mortgage and not evict her no matter how long she is unable to work

The council now want £900 from us so they will give us a licence to rent to Emily, for £900 I get naughty-word all in the form of a service from them.


Part of me now wants to evict Emily and make her a council burden as it will cost them more money! Worse we could also be taxed on the "income"

We are out of pocket but we have done the right thing to help Emily.
Emily has said she is very happy where she is and is very grateful to us.

I'm still naughty word off by this £900

macafee2

Well sadly that's no surprise. Especially on the part of the Local Government who , from personal experience, will never be there to help, but to make money out of the generosity of others.
"Emily" has been lucky to have you and your wife in her life. One could only hope that your effect on her future will be beneficial.

Trying to "evict" someone is a costly and time consuming business.

I think you need to talk to someone in the renting/housing business for some guidance.

Well done.

I may be wrong Ian but I thought such a licence only applied to HMO’s?

Not according to the council where "Emily" is.
We will look into it, thanks for the heads up
macafee2

I don't want to evict her and it would be more a paper exercise.
If we go through the motions the council may have to dip into their pocket.
We would of course not evict Emily, we gave her our word that this is her place to live until she wants to move out even if she cannot afford to pay and that to us is worth more then the money


I know its financial madness but sometimes you have to do the right thing.
We have, Emily has not. We have been lucky, Emily has not.

macafee2

I assume your "rented" property is in a Selective Licensing Scheme area. If so, I believe the penalties for not complying with the requirement for a license are high.

Is Emily a family member?

Unless I have missed something important in your post, I don't really see why you would have an issue with possibly having to pay tax on your rental income. We pay tax on the income from our rented house as do all other landlords (well, at least most). We could all argue that by providing a property for a tenant we are performing a service and thus reducing the burden on the local authority! :}

because I'm not making any money out of it. To keep repayments down it is an interest only mortgage.
most landlords make money or get the mortgage paid so in "25" years the house is mortgage free and it cost them nothing. "Emily" cant afford to cover a repayment mortgage so until Emily dies we wont make money. Once she dies we could rent for a price in-line with other properties.
When it comes to repairs, there is little in the kitty. My wife was going to have the boiler changed but not if we have to pay out £900, as there wont be enough in the kitty.

ho hum

macafee2

Ian - this is not intended to be an argument but is intended to help you see the situation clearly (at least how I see it, but I am not a tax or local government expert!).

From what you have written, I would say that what you are doing is exactly the same as any other landlord. You have bought a property (in your name) that is being rented out to a third party and is appreciating in value. The third party is paying you rent in the form of a payment into your mortgage account plus an amount that is "put aside" by you for repairs. You should therefore be complying with all the local authority licensing requirements and paying tax on the rented property in accordance with the current "buy to let" tax regime. There are tax allowances available for certain repairs which can be deducted from the market rent for tax purposes.

I would suggest that you need advice from a tax advisor.

You thoughts are in the right place and I take my hat off to you. I have lost thousands by trying to help people, The last person I 'Payed it Forwards to was a young woman buying a phone I was selling for her to give one of her kids. On finding out she was a single mother with 3 kids I made sure she would have a Happy Christmas so I bought the other 2 kids second hand phones and a Christmas present for her also that she and the kids would like which was a laser music ball. Her ex did not pay the child allowance so I covered it. Lets just say I would have saved money just by giving her the phone for free rather than making a good Christmas for her like I had.
What goes around comes around I believe.
You have helped her all you can now. You'll unfortunately have to suck up the £900 ;)

Not 100% sure
 

I know a long time ago my brother was looking into buying the council house where my mum lives and one of the things that was discussed is that if he was to buy it she could live there paying a very small amount of rent/rent free and there was no tax implications and once she was gone it could be sold with no capital gains tax because the person living there was a family member.

Not 100% sure if its correct but might be worth looking into

Stan