What happens if the taxpayer starts paying a market rent?
A. If the taxpayer is liable to the income tax charge for the year 2005-06 but from 6th April 2005 pays the legal owners of the land a full open market rent, the taxpayer ceases to be liable to the income tax charge. However, if the taxpayer later stops paying the rent or the rent paid falls below an open market rental or if the rent is paid for only part of the year, then the taxpayer is liable to income tax on the benefit he derives that is above the rental actually paid. Please note though that paying a market rent for the use of chattels will not mean that the POAT charge ceases to apply since the basis on which the benefit is computed is different than for land. For example, a taxpayer agrees to pay an open market rental from 6th October 2005 for a house with a monthly rental value of £1,000. The taxpayer would be liable for income tax on the benefit derived from not paying the rental for the first six months of the year of assessment £6,000 (6 months at £1,000). But he would not
