In M Buzzoni (Kamhi’s Executor) v HMRC (TC01129 – 19 May) a woman (K) held the lease of a flat in Knightsbridge. In 1997 she granted a rent-free underlease of the flat to a company (O) to begin in 2007 and expire in 2094.
The underlease contained several covenants which reflected those included in the main lease and included a requirement to pay an amount equal to the service charge which K was required to pay under the headlease.
On the same day she transferred the underlease to a newly-created settlement the trustee of which was a company (L) in the same group as O and the beneficiaries of which were K’s two sons. K died in 2008.
HMRC issued a determination on the basis that the creation of the underlease had been a gift subject to reservation...
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