Readers’ forum: Minimising tax on sale of valuable leases.

My client has posed me the following question. A few years ago her brother wanted to turn his freehold house into two leasehold flats. He gave her the freehold so she could grant him two leases.

Last October he died leaving the two leases with 30 years to run. She is the executor of his estate and she has been advised to extend the leases before selling them (involving surrenders of the old and grants of new 999-year terms). She proposes to do this for no premium as she does not think of the freehold as her own asset.

She cannot grant new leases to herself so her solicitor has advised her to set up a management company and use it to extend the leases. The problem is that the two short leases were valued for probate at £800 000 (on which IHT was paid);...