Up until now HM Revenue & Customs (HMRC) were of the view that Business Property Relief 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 Mrs Pawson who died in June 2006. However, Mrs Pawson’s executors appealed this decision to the First Tier Tribunal and the case was heard in November last year.
The tribunal allowed the executor’s 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.
Andrew Arnott, a partner of Saffery Champness Landed Estates and Rural Business Group, says; "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 (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.
"It 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 tribunal’s decision", Andrew Arnott concludes.
