HMRC has won the latest case resulting in denial of Business Property Relief (BPR) for a holiday let business, in a development likely to be of interest to those in the rural and farming sector who rent holiday accommodation.
The new case 'Cox' involved the executors’ claim for BPR regarding a number of properties within Crail House, Fife, Scotland.
It centred on the provision of additional services much like previous cases Graham (2018) and Vigne (2017), according to analysis by accountancy firm Saffery Champness.
Three flats within Crail House were used exclusively for the purposes of holiday accommodation with a fourth being the owner’s principle private residence.
As the owner was based on site, he was able to provide additional services to guests over and above the simple letting of the properties.
The executors of the estate claimed BPR on the value of the property arguing that this was a business operation and as such eligible for relief.
HMRC rejected the claim with the case subsequently coming before the First Tier Tribunal (FTT), explains Saffery Champness.
Evidence cited many additional activities undertaken by the owner including the provision of books, DVDs, information leaflets and sporting equipment, childminding services, transportation, and provision of breakfast and supper to guests.
The grounds of the property were also used for a wedding and as a venue for the Crail Festival with free attendance provided for guests staying in the property.
The judgement in favour of HMRC found, however, that no services were provided on a regular basis, especially not in the two years preceding the death of the owner, the relevant period for the relief.
Saffery Champness adds that the FTT judgement also found that the types of services provided were insufficient to tip the balance in favour of this being a non-investment business.
Although the appellant had made comparisons to earlier, similar cases the Tribunal concluded that in Graham particularly the additional services provided were exceptional and went far beyond those provided at Crail House.
Jenny Healy, director of accounts and audit at Saffery Champness, says the case shows yet again that HMRC will likely be successful in rejecting claims for BPR on holiday let businesses.
"The judgement makes clear that for most holiday let businesses the provision of additional services will be seen as incidental to the main investment activity undertaken," she added.
"In order for a holiday let business to make a successful claim the additional services must be considered exceptional, that is more akin to that of a hotel than that of a standard self-catering property.”