If I gift my house into my son's name, keep living there but pay a market rent for seven years and then continue living there after seven years following the gift, do I still have to pay rent or can I cease paying rent as seven years have passed in order for the house not to be counted for inheritance tax purposes? 

Arthur Weller replies  

The issue is that if one gives away a property, but continues to live in it, this is a gift with reservation (GWR) and is not effective for inheritance tax (IHT) purposes. However, if someone pays a market rent, then one is not benefitting from the gift, so it is not a GWR. The important seven years in GWR terms are the seven years before death. If, during the seven years before death, the person who made the gift is not paying a market rent, this becomes a GWR and is subject to IHT. So, the bottom line is that if you intend to continue living in the property until you die, you need to continue paying a market rent until you die, and not just for seven years from the date of the gift. This can be seen in the Example in HMRC’s Inheritance Tax Manual at IHTM14335.