CTM40440 | Particular bodies: housing associations: co-operatives - disqualifying letting
From HM Revenue & Customs · Company Taxation Manual
A housing association () may be disqualified from relief under () if there is letting:
1. by the association to non-members,
or
2. by a member to a non-member.
In the case of 1. above, the association should be asked for an explanation if, as is likely, such letting is not permitted by its rules. A report should be made to CTIS (Technical) including an estimate of the probable rental income arising on the rents from non-members.
In the case of 2. above, the official letter of approval issued to the association ()
specifies the limited extent to which sub-letting by members will be permitted. If this limit is exceeded advice should be sought from CTIS (Technical).
Where it is agreed that the requirements of have been substantially complied with the rents from non-members will be taxable under the normal property income rules. The interest paid in respect of a property let to a non-member will not be within and the loan relationship provisions will apply.