Connected party transactions are not typically problematic at the point of purchase or sale because it is generally accepted that in order to avoid tax charges the transaction must take place at the exact price supported by a valuation by a qualified surveyor.
Rent from connected parties can be more problematic because individuals may, somewhat understandably, struggle with the idea that "paying rent to themselves (through their pension)" has to be prioritised in the same way it would with a third party landlord.
If rent is not paid in accordance with the lease and any outstanding rent chased in the same way it would be by a third party landlord – which potentially creates the novel concept of a trustee having to chase the business which they themselves control for outstanding rent – then significant tax charges can apply.
Gareth James is head of technical at AJ Bell
