No interest in possession on death

In her will a widow left her house to her five nieces and nephews. However she granted her friend and neighbour the right to live in the house rent-free other than insurance and maintenance costs for the rest of his life. The property was not to be sold without his consent. The neigbour moved into the house after she died in 2004.

On the widow’s death the beneficiaries agreed to pay the inheritance tax out of their own funds – rather than sell the property. The neighbour continued to live in the house until he died in 2017. After his death the taxpayers paid inheritance tax on the basis that he had an interest in possession in the house. They later had a change of mind and claimed a refund of the tax on the basis that there had been no interest in possession. HMRC...