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I am an Irish National Living Outside of The EU.

I am an Irish national living outside of the EU. I am purchasing a property in the UK in a non-resident company. I propose to allow my son, who lives in the UK, to live in the property rent free - is there any reason why I cannot do this?

Arthur Weller Replies: 

If the son is neither a shareholder nor an employee (e.g. director) of the company, and only the parent is shareholder and / or employee of the company, then there is no reason why you cannot do this. The parent is not UK resident, so not liable to UK tax. 

The son is UK resident and receiving a gift, but since he is not a shareholder, it cannot be deemed a distribution from the company; and since he not an employee of, nor does any work for, the company, it cannot be deemed a benefit in kind being received by virtue of his employment. 

(There was a court case (Newfields Development)  the outcome of which said that HMRC can attribute any shares held by associates to an individual, irrespective of whether that individual is a shareholder in the company - but I don't think that it is relevant in this case).

This question was first printed in Tax Insider in November 2009.