Many years ago my wife and I bought a house for her parents to live in. Her parents made a contribution and we got a solicitor to witness a letter saying they could live there as long as they wished. Her parents have now moved into a care home. If we sold the house would their right of occupancy, via the letter, be the same as a life interest trust exempting us from any capital gains tax?
The letter giving your in-laws a right of occupancy will probably have established a trust which should qualify you as trustees for “principal private resident relief” from paying capital gains on a property which has been the only or main residence of persons entitled to occupy it under a settlement. If HMRC query this you may need assistance in establishing that your letter constituted a “settlement”.