Family Home IHT

[fabiusmaximus]

Hi all,

I've been considering options with regard to rapidly releasing the value held in a property. As far as I can tell, other than selling and downsizing, it may be possible to sell the home, at an independently valued market price, while carving out a lease.

I'm aware that the recent Hood vs HMRC ruling proscribes leases as a reservation on gifts. Does this take any effect on sales? I've come across the suggestion that it might be instead necessary to occupy the 'license to occupy'. Is there any truth to this?

Any advice would be much appreciated,

Many thanks

[AnthonyR]

If you sold the property at market value (I assume to a family member) and then leased it back from them at market value this should not cause any complications from an IHT point of view. I assume you would then gift some of the proceeds of sale to start to reduce your IHT exposure?

The Hood case was a complex one and did not state that a lease was a reservation per se, however, where leases granted contain terms that still provide benefits to the grantor then this could be a reservation of benefit. This issue here was that Hood kept the reversionary freehold and granted a lease which passed on obligations in the freehold to the leaseholders (her children). If it were not for those covenants it's possible the planning could have succeeded.

However, as usual, I'd recommend taking specific tax advice on the point and don't just instruct a conveyancer who doesn't understand the tax points.