Tribunal rules against HMRC on Business Property Relief from Inheritance Tax
Until now, HM Revenue & Customs (HMRC) was of the view that Business Property Relief (BPR) from Inheritance Tax was only available on a holiday letting property if either the owner himself, or through an agent, was substantially involved with the holidaymakers in terms of their activities on and from the premises, and by reference to the level and type of services provided.
In a recent case HMRC had denied BPR on a holiday property owned by a Mrs Pawson who died in June 2006. However, the executors of Mrs Pawson appealed this decision to the First Tier Tribunal and the case was heard in November last year. The Tribunal allowed the executors’ appeal and in their findings confirmed that the business was being conducted with a view to gain, and that it was then necessary to consider whether the business consisted of one of wholly or mainly the holding of an investment.
Jamie Younger, a partner with Saffery Champness, and Chairman of Scottish Land & Estates Taxation Group, has provided the following comment:
"This is of significant interest to landowners, farmers and indeed anyone letting a holiday property. The services provided to the occupiers of the property were not within the terms set out by HMRC, but even so the Tribunal found the services provided such as clean bed linen, heating etc to be significant, and over and above what would be provided by a property owner letting a property as an investment, and accordingly the business did not consist of holding an investment.
This is very good news for owners of holiday letting properties who up until now had assumed that BPR would only be available if the criteria laid out in the HMRC manual were met. It remains to be seen whether or not HMRC will appeal against the decision of the Tribunal."