The tax trap threatened to catch out those who had transferred their property portfolios into professional companies to make their business more efficient, in the wake of harsher tax rules imposed in recent years.
Landlords were not even able to sidestep the rules by charging a low token rate such as £1, as exemptions from the charges only applied to “genuine” businesses charging market rates of rent, or companies planning to develop a property.
It is a major victory for this newspaper, which first flagged the issue in March.
Tim Walford-Fitzgerald of tax firm HW Fisher said the move was welcome.
“Anyone generous enough to give up hundreds or even thousands of pounds a month in rent would not only have lost out on a large amount of income, but would have been hit with extra tax charges as well – which was not a particularly charitable approach from the Government,” he said.
“It is good to see policy makers responding to concerns and acting on them.”
Ms Frazer confirmed the change in the rules would be backdated, so no one who has helped out via official state schemes will be worse off.
Almost 65,000 refugees have applied for visas under the Ukraine Family Scheme – which allows Ukrainians with family ties in Britain to relocate here – and the Homes for Ukraine resettlement scheme, which allows Ukrainians to come to Britain and stay with named sponsors.
Britons who take in Ukrainian refugees receive £350-a-month in state grants for up to a year. Ms Frazer confirmed these payments would be exempt from taxation.