Business partner living rent free in joint owned house

by **jay118** on Wed Jul 21, 2010 8:58 pm

Hello,

Please can someone help me.

My and business partner and I own 10 houses which we rent out. There is no partnership agreement and we fill in our own personal tax returns based on the split of income from the house rentals. Our accountant creates accounts for our business and then splits the income (I have other business interests also on my tax return)

However, my business partner is living in one of the 10 houses which we jointly own. He is not paying any rent or any amounts to the mortgage on the property. (but is still receiving income from the other rentals)
How should this be shown in the accounts and tax returns? I really have no idea if it is to be taken as benefit in kind on his tax return, so therefore what should happen on my tax return as effectively I am 'losing' my half of the rental income on this house, can I claim it back?

I apologise if this is a little confusing!

Many thanks for reading,

Jay

by **jay118** on Wed Jul 21, 2010 9:23 pm

Just to clarify, there is no partnership tax return.

Thank you

Jay

by **mullet** on Wed Jul 21, 2010 10:35 pm

How should this be shown in the accounts and tax returns?

Disallow the expenditure (interest, repairs, utilities etc) on this property in the same way that you would deal with the private element of motoring expenses.

I really have no idea if it is to be taken as benefit in kind on his tax return

BIKs are for employees. In this situation disallowing the expenditure will bring about the correct outcome.

so therefore what should happen on my tax return as effectively I am 'losing' my half of the rental income on this house, can I claim it back?

There is nothing to "claim back". This is an arrangement between the two of you, and there is no adjustment possible in respect of rent which you will not be receiving as a result.

by **Incredulum** on Thu Jul 22, 2010 11:49 am

You should charge him the 50% of the rent you are due. That is the only way to "get it back".

Otherwise you are very kindly letting him rent free in half a house you own, and therefore the expenses relevant to that property are not available to be offset against income of other properties that are rented out.