Sale of property and continued living rent free.

[markit]

There is no stamp duty until April. In order to reduce inheritance tax can the following be done?

1. I purchase my parent's home for £495k and transfer the money.
2. I allow them to live rent free in the house. They do not own it now, so it is out of the estate. (It is not being gifted for zero consideration).
3. They gift me or my children approximately £495K, or a mixture.

As long here they survive for 7 years there is the £495k is out of their estate.
If they need care, I pay it myself from my money - so no issues. I would anyway.

Is there anything wrong with the scheme?
Is allowing them to live rent free acceptable in this scheme?

Thanks

[AdamS93]

Yes, there is something wrong with the 'scheme'. It is probably caught by the pre-owned asset tax legislation.

What other assets do they have? If it is just their main residence which is worth £495k, then it is unlikely there will be any IHT due anyway.

IHT is fairly easy to reduce without elaborate 'schemes' that may or may not work if you plan in good time.

To be blunt, if you have £495k to spend, it would be worth spending a very small proportion of that on some IHT advice.