Hello all
A client previously owned a number of properties let out as Furnished Holiday Lets. Around 15 years ago, the client gifted a 85% interest in these properties to a Relevant Property Trust, treated as a Chargeable Lifetime Transfer for IHT purposes, and the trust prepares IHT100s every 10 years. Client is excluded from benefitting from the trust in the trust deed.
The continuing letting of the properties is dealt with via a partnership between my client and the trust, with the rental profits being split in accordance with the 85/15 interest in the properties.
For between 4 and 8 weeks in most years, my client occupies one of the properties as a holiday home. The client does not pay the partnership any rent for their occupation, however we do make a restriction to the rental expenses for the private proportion of these relating to client occupation.
I am now considering:
- Whether the trust is settlor-interested, and
- Whether the client has made a gift with reservation of benefit by being able to continue to enjoy occasional rent-free occupation of one of the properties.
- If 1 or 2 above are an issue, whether the payment of a market rent for occupation of the property for the relevant periods would overcome the problem.
For 1 above, looking at ss624-625 ITTOIA 2005, I believe that the client may have retained an interest in the property - i.e. by occupying one of the properties to the exclusion of the trust for 4-8 weeks, she is benefitting from the property by a greater extent than the 85/15 split sets out.
For 2 above, when the gift was initially made, I believe that we were relying on s102B to argue that there is no GwROB. I am trying to get my head around whether having sole use of the property for 4-8 weeks each year rent-free could be judged to constitute the client reserving a benefit.
Has anyone had a similar case, or have any guidance to help me focus my thinking on this?
Many thanks
Neil