Income from caravan

My client owns 2 caravans. She lets her sons rent them out as a business but she doesn’t receive any income from them. However, she wants to keep them in her name rather than gift them to her sons. Would this affect her tax credits? Would HMRC take the view that she is depriving herself of an income?

Well on the basis of your description, she has capital assets which she is permitting her son’s to use, free of charge, for their business purposes. She is not involved in the business or entitled to anything from it. Just because you have a caravan, doesn’t mean you are entitled to rental funds - there is potentially a lot of work which the sons are doing in order to make any money off this and she is not automatically entitled to any part of that. She can’t deprive herself of income that she isn’t entitled to.

But yes, the arrangement has the potential to look somewhat dodgy. I suspect that if anything happens, it’s more likely to take the form of an allegation that she is covertly drawing an un-declared income from it which is just being filtered through her sons. Or she has some sort of beneficial stake in the business’ earnings or what have you.

I suspect that all parties would benefit from taking advice on formalising the arrangement in some sort of sensible way. E.g. if the agreement was that she would loan the caravans to her sons or their company for a renewable fixed period of a year or so in exchange for a peppercorn each year. It would then be much easier to explain to anyone asking.

Thanks Elliot. I agree that it does look dodgy on the face of it but she appears to be genuinely doing it to help her sons. They are setting up a limited company so all will be above board. I don’t suppose you could point me in the direction of any helpful regs/guidance?

Could it not be considered that she is “providing a service” (the use of the caravans) to her sons free of charge, and therefore come within r17 of the TC(DCI) Regs?

I don’t know if this counts as a “service” though?

Charles - 23 August 2019 02:31 PM

Could it not be considered that she is “providing a service” (the use of the caravans) to her sons free of charge, and therefore come within r17 of the TC(DCI) Regs?

I don’t know if this counts as a “service” though?

Giving it limited thought, I would think that’s a bit of a stretch. I think the reg is making reference to employment or quasi-employment sort of arrangements where some sort of labour is provided as against here where the limit of mum’s involvement is basically to permit use of an asset. But who knows what HMRC would say.