In Julian Nott v HMRC [2015] TC04897 the First Tier Tribunal (FTT) decided that the letting of holiday units was different to operating a B & B or a hotel and so did not amount to a trade for the purposes of NICs or sideways loss relief.

  • The taxpayer inherited an estate in Cornwall comprising a manor house and eight residential units and two cottages and a farm.
  • The manor was a residential long let, and five of the residential units were let out as holiday lets. 
  • Mr Nott provided breakfast (optional) and the units were cleaned at the end of the let.
  • The holiday letting side of the business made a loss.

HMRC treated his letting of the units as Furnished Holiday Letting (FHL).

The taxpayer did not agree. It was to his advantage to claim that his holiday units were a conventional trade, just like a B & B or hotel.

  • For 2009-10 he could offset his losses against other income for the purposes of Class 4 National Insurance Contributions.
  • He would then also be able to offset losses for subsequent years against his general income for income tax purposes.

The taxpayer argued that his estate was a business and that once let his holiday units visitors were not granted exclusive occupancy, his holiday business was akin to a hotel. HMRC treats hotels and B&B activities as trades.

The tribunal reviewed the facts and was unable to find that his letting activities amounted to anything further than an exploitation by the taxpayer of his property. Importantly he did not describe his business as a hotel or B & B. It concluded that his income was rental income and it was FHL income.


  • FHL income is treated for income tax as if it is trading income, however it is not trading income for NICs and since 6 April 2011 no sideways loss relief is available for FHL losses.
  • Had the taxpayer been able to prove that he was running a hotel, it would also have qualified for IHT Business Property Relief (BPR) although in a mixed use estate HMRC will consider the activities of the estate in the round when deciding whether BPR applies.
  • The taxpayer was unrepresented and may not have been aware of the BPR case law on FHLs, notably Pawson v HMRC which explores the difference between active and passive investment activities, see IHT Business Property Relief (BPR) (subscriber guide) for analysis and links to FHL cases.


Julian Nott v HMRC [2015] TC04897