A. In order to be deductible from rental income for tax purposes, property business expenses must pass the familiar test of being incurred “wholly and exclusively” for the purposes of the business. HM Revenue & Customs take the view that if property is let at less than market rent to a relative then the related expenses are incurred partly for benevolent or philanthropic reasons so fail the wholly and exclusively test. Strictly speaking, this means that no expenditure ought to be allowed as a deduction against the rental income but HMRC will allow a deduction up to the amount of rent received for the property. This means your client will not be liable to tax on the income from her son but it also means she will not have a loss eligible for tax relief.
If you would like to discuss a tax query why not contact the Tax Advice Line on 0844 892 2470? Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
Book your place at our Land & Property Seminars:
