I have been consulted by a client who has an “Ingram” type arrangement over his home. Everything appears to be in relatively standard format but the original lease, granted in March 1999, was for 20 years only and so will be expiring very shortly. Do any forum members have any ideas on how the client should proceed from here? Assuming it is practical and possible to do so, perhaps a lease extension could be the solution although query whether it should be on the existing peppercorn basis or at full market rent and whether there might be any tax implications, in particular POAT. Our feeling is that doing nothing is not really an option as then the client will have no right to occupy his home and any continued occupation of it (not being under the terms of the original lease) could in any event amount to a reservation of benefit.
This is quite a common scenario and it will need to be handled carefully or the whole thing will fall flat on its face. A shorthold tenancy will need to be put in place with full market rent paid and with suitable periodic rent reviews. Establishing full market rent is not always straightforward given that in many such cases the condition of property is not suitable for letting. But that is a problem for a valuer to deal with. There are plenty of things that can go wrong, eg insufficient rent according to HMRC on review in due course, periodic reviews not frequent enough (again according to HMRC when they come to look at it), any financial benefit provided by the freeholder not accepted by HMRC as appropriate to the case.
I note your reference to POAT, and wondered if the arrangement may already be within the ambit of that tax, as the introduction of POAT was designed (inter alia) to catch such schemes.