tax avoidance?

[notlynx]

I have a tenant in my buy-to-let property. He is a very good tenant and I would like him to continue renting from me but he is thinking he will have to leave as he is now struggling to meet the rent payments. I would consider reducing his rent because my mortgage repayments on the property have come down considerably. If I reduced his monthly rent by, say, £150, this would mean that at the end of the year, my income tax liability would proportionately reduce. (not by a huge amount).Would the tax people consider that to be tax avoidance, but legal? Or would it be illegal? Any tax experts out there?

[cathfromsaron]

you can charge what you like!

why not ask him to do some simple maintenance in exchange for the reduction?

[notlynx]

Thanks cathfromsaron - I thought about a sort of "exchange" deal such as you suggest, but I know how HMRC can come down on you if they suspect any kind of tax evasion, or tax avoidance which falls outside of their "permitted" rules! But who the blazes knows what they will or won't accept - until it's too late!!

[cathfromsaron]

well, good tenants are hard to find, and i just meant washing windows etc lol!

cath x

[mazie]

Ring them and explain what you are thinking of doing. They are usually helpful

[ummmm]

No, that isn't tax avoidance.

[factor-fiction]

... unless you reduce his rent by £50 a month but ask him to slip you £20 cash or buy some food etc

[twix123]

If your tenant were to leave and you could only let out the property at a lower rental your taxable income would be reduced anyway. HMRC aren't really interested in why your income has fallen, especially in the current climate, only that you are paying the correct tax on the amount you receive.

[Skyline D]

It's not tax evasion to reduce your charges in order to keep a valued customer, any more than it is if Marks & Spencer drop the prices on an item to sell it. Carry on, the Revenue won't care.

However, do NOT ask him to do some maintenance to make up the difference. Well you can do if you like but you'd have to value the work done and include it as rent and pay tax on it.

[tonywiltshire]

As has been said you are not breaking any rules by reducing the rent but be careful mortgage payments can go up as well as down. The local housing allowance which is the maximum LA will usually pay on Housing benefit have gone down in many areas of the country recently, which often means tenants contributions increase, but represents the general reduction in rent charged.
If your tenant is paying rent under an assured tenancy I suggest you do not reduce the rent before the fixed period, usually six months, has expired then write to the tenant and provide him/her with the new rent and the date of commencement.

[Peter Pedant]

renew a shorthold assured tenancy for the reduced rent
declare the [reduced] rent as usual
pay tax due....

[notlynx]

Many thanks for the responses, they have helped me understand the pitfalls!Tax evasion and tax avoidance are sometimes difficult to define, and even simple things can be seen as "money laundering", so I believe it pays to watch your back!