Father inherited a mortgaged property, a development opportunity exists for siblings on plot, tax advice needed please!

[InheritanceTracks]

I have an inheritance tax situation which I would like resolved in the best most efficient way possible. Any help on this would be hugely appreciated.

- A property currently in probate being passed to my father-in-law (Age 74) sits on a plot which has the potential to be split to enable another modest 3 bed to be built on the far half of the garden, including its own entrance, off-street parking/drive

- Multiple estate agents and a local architect have indicated that the build is feasible and likely to pass planning.

- Value of the current plot as it stands now is £500-550k.

- Estate agents believe that GDV of new build could be £425 with a negative impact on the current house of £75k, meaning a potential total final value of £850k roughly

- The current property has a £200k equity release mortgage on it at a high 7% which needs to stop asap (£1k per month cost)

- There are two siblings - my brother in law and my wife. Both keen to develop the plot to maximise the return

- Father-in-law happy for the two siblings to move ahead with planning abuild but does want some capital out as soon as possible (£100k, over and above the resolution of the £200k equity release mortgage on the original property) and then the profits of the build could go to the siblings.

- Initial thinking is to let out the property (estimated £1500 per month) so that the income covers the remortgage on the property and to cover father-in-laws own small £50k mortgage payments to give us some breathing room to plan, and to apply for planning should that be the best course of action. If necessary siblings can cover the small monthly cost of the £50k mortgage in the short term.

- One of the big questions is - How can we deal with the £200k equity release mortgage in the long run? Father-in-law may be too old/not have the appetite for a standard remortgage. Siblings would perhaps therefore need to remortgage in their names but that would mean "purchasing" the property with all the tax implications this brings.

We need to get clarity on the tax implications of all this and to determine the best way to proceed on the whole thing without incurring prohibitive duties but still maximise the return. Any course of action which is clearly the most sensible? Limited company route worthwhile?

Any help at all would be much appreciated.

Many thanks in advance.

[Ian McTernan CTA]

I usually try and answer questions, but in this instance I feel the issues are more than can be answered on a tax forum. You have IHT, CGT, Income Tax on developments, whether to do the development or sell with planning, remortgaging, who owns what and how to structure, to name but a few. Not to mention current and future circumstances of all parties and current finances.

I'd suggest you seek professional advice with all parties being involved from the outset to determine an agreed course of action and see through the plan.