They relinquished their last bit of standing on British soil in June – by order of the King – after vacating their former home of Frogmore Cottage. But Prince Harry and Meghan Markle sent the rumour mill into overdrive last week, after it emerged that they might be handed back some very important royal equity after all.

According to reports, King Charles is quietly considering leasing a property to Harry and Meghan in Kensington Palace in order to adhere to a monarchical rule that any counsellor of state – that is, a member of the royal family who can deputise for the King if he is abroad or unwell – should have a home in Britain. As one of Charles’ seven counsellors of state, Harry is therefore required to own land in his home country. But while Buckingham Palace representatives have denied the reports, we’re told that hasn’t stopped tension brewing behind closed palace doors.

Insiders tell us that Prince William and Kate Middleton are outraged by the idea – however undeveloped it is at this point – that Harry and Meghan will be welcomed back into the royal fold, especially as it’s said they’ll be offered space in Kensington Palace, where the Prince and Princess of Wales themselves keep a home and their private office. It’s no secret that there’s no love lost between the now estranged brothers and, as far as William sees it, Harry has washed his hands of his motherland, family and former royal life. Why, then, should he have the red carpet rolled out for him at a very royal residence?

“Obviously, William and Kate are never going to step out of line, but they still have disagreements – like any family,” says an insider close to the royal couple, who officially live in Windsor with their three children, Prince George, 10, Princess Charlotte, eight, and Prince Louis, five, but also spend a great deal of time at Kensington Palace. “They both feel that, by offering Harry and Meghan a place to stay there, King Charles is taking the wrong approach. To William, it seems like the royals are bending over backwards for the couple all over again when, as far as he is concerned, the royal family has been steadily sending a clear message to the Sussexes that they are no longer going to put up with their demands. He believes, with Kate’s support, that they should be continuing down that line and putting a harsher message out there that, following Harry and Meghan’s behaviour, they won’t be receiving a warm welcome in the UK.”

The question of accommodation in the UK has been a long running issue for Harry and Meghan, ever since they formally stepped down as senior royals and moved to California – where they’re now based in a £11m mansion in Montecito. At first, they kept their marital home of Frogmore Cottage, after being gifted it by the Queen. However, earlier this year, it was reported that they’d been ordered to hand back the keys to Frogmore – months after Harry launched yet another attack against his family in his memoir, Spare, and singled out Prince William and King Charles as being particularly aggressive towards him and Meghan. They’ve also been denied royal security on British soil, as well as other resources provided to working royals, prompting them to launch several lawsuits against the Home Office.

Earlier this month, it was reported that Prince Harry had asked to stay with King Charles at his Balmoral estate in Scotland during a 24-hour window in the UK – before he headed to Germany for the Invictus Games. After his request was denied due to “time constraints”, it was then rumoured that he’d asked to stay at Windsor Castle but was again rebuffed. In the end, Harry stayed at a hotel, though he was permitted private access to visit the Queen’s grave at Windsor Castle’s St George’s Chapel.

However, after months of toeing the line that the royals will no longer be offering olive branches to Harry and Meghan – who have consistently lashed out at the royals since stepping down, accusing them of animosity, racism and lack of support – we’re told that King Charles now faces a conundrum in compliance with the law. Harry is still listed as one of the King’s seven counsellors of state – a role also undertaken by Prince William, Princess Anne, Prince Edward, Prince Andrew and Princess Beatrice. Of course, Charles could always decide to relieve Harry of his title and role. But, seeing as it’s effectively a figurehead position, he’s reportedly reluctant to rock the boat and face further accusations of “antagonism” against Harry. As such, insiders say that – having weighed up the options – Charles is tempted to concede and offer Harry and Meghan a pied-a-terre at Kensington Palace, with one source reporting that it seems “a reasonable thing to do”.

Though the King’s representatives have rubbished these claims, saying they’re “not true”, it’s unlikely that they’ve come from nowhere, as the rule for counsellors of state is undeniable. Now, it’s falling to William and Kate – and Queen Camilla, who apparently shares their views – to dissuade the King from following through with his purported plans.

“At the end of the day, Harry and Meghan have made some very disparaging remarks about their family members, who have taken it all with a dignified silence,” says our source. “So, both William and Kate are confused as to why they should now offer them any kind of cordial invitation without receiving an apology. They’re concerned that Harry and Meghan seem to have a hold over Charles, who has moments of guilt about their estrangement. But William has been pleading with the King to see that this is their own doing. Kate and William call Kensington Palace home when they’re in London and they don’t believe the Sussexes deserve to stay there.”

The way William sees it, the Sussexes have made their bed in Montecito, thousands of miles away from palace quarters – and now they should lie in it.