Am I being unreasonable in not wanting to help someone commit benefit fraud?

[twinsetandpearls]

We recently rented out our house to my sister and her friend for 135 a week which is under the going rate. We were happy to do this as I wanted the security, or what I thought was security of renting to people we knew. We did not take a deposit from them but they do have legal contracts.

Two weeks down the line it emerges that her friend, who my sister vouched for is a complete bunny boiling nutter who has stolen from my family owes money left and centre, and has done a bunk owng us rent and breaking our contract which was for 6 months. We are purusuing this girl for the money.

My sister is left in the house on her own and is paying just under half of the rent. She is struggling now as she is paying all the bills on her own. She wants me to sign a "fake" contract saying that she is paying 135 a week on her own so she can get housing benefit.

I have refused and she thinks this is really odd.

you don't have to pay tax on the first £3k or £4k tax you get on rental income.

YANBU - at all. Yor sister is asking you to lie for her - saying the rent is £135 not the lower amount she pays.

I can understand it is difficult for her but this is not the solution

Re tax - isn't the rental income off set against the mortgage? - and you only pay tax on the proportion of rental income over the mortgage amount? - therefore no tax to pay

It falls under 'residential letting'.

here

Also, many home insurance policies will not allow a landlord to accept DSS tenants.

furthermore, HB in many councils is calculated on the amount of space they determine that you need.

so a single person living in a three-bed house may not get enought benefit to cover the rent on a place that size.

TBM, I think you have got hold of the wrong end of the stick.

The OP is not trying to avoid paying tax on the rental income. Her sister is asking her to draw up a fake tenancy agreement stating that the sister pays, say £200 per week rent, so that sister might be granted more HB, even though she actually only pays the OP £100. Not only is this benefit fraud and ILLEGAL, the OP will be taxed on £200pw income rather than the £100pw that she actually receives. The sister would pocket the difference.

I'm stunned that your sister would ask this of you and that her family seem to think you are out of order to refuse.

When I was on income support briefly after leaving university I was not alowed to claim housing benefit as the house was owned by a close family member.

The other tenants (it was a student house except we all graduated at the same time) claimed HB but there was a limit that they could claim as single people so your sister may not even be entitled at all.

I mentioned the tax issue, and Freckle's point is similar to what I'm saying. I'm sure OP isn't trying to avoid tax, she would be liable to it on rental income though, and it would be assumed that she was getting whatever her sister claimed rent was.

And Expat, I think you only get off tax (within certain limit) if you're letting out a spare room not a spare property.

Anyway twinset, good luck sorting things out.

Her hb will be based on how many bedrooms she NEEDS i.e. one. Doesn't actually matter how much rent she pays. The going rate of hb in the area may be more than the rent and she will be allowed to pocket the difference as long as it's not more than £15.

She may be allowed to claim hb but it depends on what you do with those rooms normally i.e. if she left would you rent them out to someone else? Have you ever rented them out before? Would you treat her as any other tenant (e.g. if she didn't pay her rent would you evict her?). You will probably be interviewed by the council if she goes ahead and claims hb (so they can satisfy themselves that this is a "commercial" tenancy).

This is not a tax issue at all, I am subsidising my sister, so not making a profit so there is no tax to pay and if there was I would happily pay it.

I don't think she should be getting housing benfit to allow her to live above her means.

My insurance does not allow me to rent to DSS as well but that issu us secondary to everything else

My mortgage and insurance is £800 a month and she is paying £200

They'll only allot her HB for what her needs are, and as a single person that's one bedroom max.

On the HB form, you have to say how many rooms are in the house you're currently occupying in addition to providing the tenancy agreement.

Tell her straight up no go because of your insurance.

She needs to find another lodger.

She shouldn't even be asking you if that's the case about your insurance. Don't feel bad about saying no!

If shes under 25 she won't get £135pw HB anyway, she will only get the single room rate which isabout £65-£70 depending on the area.

Also she may not get anything at all, as there are special rules for renting from family members?

65-70 is more tham she is paying me!

There are also strict rules about claiming housing benefit when renting a property form a relative. will try and post a link

www.dwp.gov.uk/housingbenefit/claims-processing/operational-manuals/hbgm/parts/pta_03b.asp#a_ 3235

actually looks like its okay as long as tenancy legit and not over the market rent.

Even though the other girls moved out with a joint tenancy so is still liable for all the rent., If she had any other landlord then would be expecting it.

Help her find a nice bedsit and sell your house or get another tenant that is not DSS.
Why should she have a whole house for herself?

aym - they had separate tenancy agreements so are not jointly liable for the other's shortfall. Sister may however be liable fully for the utility bills depending on whose name they are in .

I am selling my house ripeberry, in the current climte that is easier said than done though. She is just in the house while we are selling and contributing towards the mortgage

Sorry didnt realise they had seperate agreements....in which case she should only claim for what she is paying...stick to your guns she is taking the mickey!!!