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Renting to family

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  • Renting to family

    Some years ago, I bought a small flat to use as our UK base as we were moving abroad, whilst we were away we allowed our son to live there as log as he covered the bills, small mortgage, council tax, utilities etc. The abroad bit did not last for long as we returned home, the flat whilst suitable as a base for us whilst living abroad was not big enough for us full time, we therefore bought another property and continued to allow our son to live in the flat.

    Being self employed I filled in a tax assessment form each year and declared the property and they adjudged that I was making a whopping £175/ year profit on it and reduced my tax code accordingly.

    Now, over the years we have spent a lot of money on the flat, new kitchen, windows, bathroom, none of which has been claimed back against the tax.

    Our son has now purchased the property from us. So I now need to declare to the HMRC that I no longer own the flat, but will I have to pay tax on the profits made on the buying and selling, or will it be viewed as a second property? I should also say that the sale value was a long way below the market value.

    I will reiterate, the property has never been seen as commercial venture, no money has ever been made on the rental, the opposite in fact with the improvements made.