Shielding main home from IHT - my research to date and questions

Disjoint

Hi all -
I've done quite a lot of research on the topic and have also paid a solicitor for advice. So please see some of the answers I received, and my thinking. Before I go and pay for some more advice I was hoping to maybe get the crowd sourced here:
In essence:
1. You cannot keep the benefit of owning your house while gifting it at the same time.
2. If you gift your house and then apply to the council for a nursing home, the gift would be treated as a deliberate deprivation of assets - in which case the person gifting the asset could be in a very precarious situation!
What you are allowed to do:
1. Gift the house and keep living in it while paying market rent to the people you gifted the house to, this brings you back to point 2 above - not ideal...
Trust are out of the question - I thought there was a magic formula with them, but unless the house is put in a trust BEFORE one of the spouse dies - there is no point in doing this. I also didn't really research this as much as in my situation it's one parent left with a sizeable house.

Now what I am thinking:
The house in question is large, some people in the street have separated the basement and created an independent flat from the rest of the house.
Could we:
Split the title of the house - have flat 1 be the basement flat and flat 2 be the flat from the first to the third floor.
The person making the gift keeps flat 1 and we draw a leasehold interest of 50 years
The person receiving the gift gets the freehold and flat 2
In this case the person receiving the gift would be two people (two daughters) - if the parent still lives in the house and uses flat 2, I imagine they would have to pay market rent. What if in this case, as one of the daughter is living abroad she keeps it as her UK pied a terre and let her parent use it in their absence? Would that be possible given there is a second daughter?
Would there need to be a physical separation in the house between flat 1 and flat 2?

What's everyone thought on this? I thought I was pretty clever in my thinking, but HMRC tends to be clever-er-er

And in a similar vein. Could we split the title of the house into freehold and leasehold. Gift the freehold and put a leasehold of let's say 30 years? The value of a 30 year leasehold would be much cheaper in the estate...

Keep_pedalling

If you are worried about IHT, then you will have an estate in excess of £1M so you won’t be applying to the LA for a care home you will be in the fortunate position to comfortable be able to self fund a home of your choosing..

I am sure we had a previous thread with a crazy idea about converting a house to leasehold and gifting the freehold no so long back and quite frankly HMRC will see right through such a tax dodge.

As the  house seems larger than you actually need, why not downsize and gift some cash instead? 

Based on a previous thread you and your wife appear to own a number of properties, and if all your wealth is tied up in property IHT mitigation is difficult without hitting a CGT issue unless you release capital from your main residence.

Jeremy535897

I don't understand it. I thought you were saying parent owns house, splits title and divides house into 2 flats, lives in flat 1, gives away flat 2? This does not tie in with the sentence " if the parent still lives in the house and uses flat 2, I imagine they would have to pay market rent. "

Browntoa

Me , finds specialist advice  on the best way forward. Possibly saves tax

You , asks random strangers who may or may not know what they are talking about . Possibly opens themselves up to a whole mess of even more complex and costly tax liabilities

Disjoint

Browntoa said:

Me , finds specialist advice  on the best way forward. Possibly saves tax

You , asks random strangers who may or may not know what they are talking about . Possibly opens themselves up to a whole mess of even more complex and costly tax liabilities

I did ask for specialist advice, and paid for it. Twice for that matter with two different practices.
That's also why I made sure to share some of the advice I received.
The freehold / leasehold part just came to my mind recently, so I'd rather socialise this idea here first - if someone were to tell me that it's a complete no go and there is already precedents on this then it saves me paying £250+VAT an hour to get something I can get here for free... "Random strangers" have in many instances saved me a lot of money, and I feel more comfortable discussing this here add nauseum without the fear of the clock running and my money ticking.
@Keep_pedalling I thought at the time to buy the house from my FIL, but we looked at a few flats for him - and while he was open to the idea, my wife and I decided that his emotional attachment to his garden and plants is too high. As you correctly identified I do quite a bit with property and for me the attachment to a piece of land and some bricks does not really compute. If he does have mobility issues (which was his main concern) I would go ahead and get planning to extend the basement and put a ramp from the street - that was agreed as the best solution.
However this leaves me still with a large IHT bill that I am trying to cut down - which is something that I have been looking at for the last 6 months+. This is why now I am considering splitting the title, as this seems to be the only option left that I have not explored.
@Jeremy535897 parent would live in flat 1, and keep using flat 2 for the time being until he can no longer walk up stairs. Flat 2 would also be our London pied a terre (given my wife stays with him already, it already unofficially is!)

Disjoint

Went through some past threads @Keep_pedalling and saw you gave some advice in 2019 on something similar. Still some questions but it does seem that I am on to something  I'll try to be a lot more concise with my idea:
Split title of the house into flat 1 and flat 2. Two separate council bills.
FIL retains flat 1 with a short lease of 30 years
Two sisters get freehold and leasehold for flat 2
QUESTION 1: Flat 1 and flat 2 are currently connected - is that an issue?
QUESTION 2: If FIL keeps using flat 2, but my wife gets to use flat 2 as well when she is in London - what are the potential issues?
I'll likely socialise this Monday with my property solicitor, she would be able to split the titles for me, but she is not as well versed in IHT.

Jeremy535897

If FIL is likely to live seven years, it may be worth trying something, but your real issue is with the gift with reservation rules. Granting a lease to yourself and giving away the freehold used to be known as an Ingram scheme, but this was stopped a long time ago. See https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14314

In my opinion, the only way to achieve anything is to split the two properties physically, FIL lives in flat 1, and gives away flat 2. Thought would have to be given to the freehold, but if it was a long lease it would have little value (I am not sure whether there would still be GWR issues regarding the gift of flat 2 because of the freehold, but if there were, presumably the freehold could be split or given away).

Schemes that involve lease premia or market rents are usually a last resort, because market rents change constantly (so the potential for accidental GWRs is huge), and they create income tax liabilities for no benefit. Main residence relief and the CGT free uplift on death would also be lost on flat 2.

You should also ensure consideration is given to the POAT rules. I am assuming that capital gains tax is not an issue at present, as presumably the whole property is covered by the main residence relief. There are also council tax issues, division of utilities, planning permission etc.