In Executors of The Estate Of Marjorie Ross (Deceased) v HMRC [2017] TC05959 the letting of eight holiday cottages did not qualify for IHT Business Property relief: it was mainly an investment activity.
- Business Property Relief (BPR) provides relief from Inheritance Tax (IHT) on the transfer of relevant business assets at a rate of 50% or 100%.
- There is no BPR if the business or company is one of "wholly or mainly" in dealing in securities, stocks or shares, land or buildings or in the making or holding of investments.
Mrs Ross owned a two thirds share in a partnership which consisted of holiday accommodation, being eight holiday cottages and two flats at one site, and a further house at a different location.
- The flats were leased to an employee of the partnership, and a neighbouring hotel, which Mrs Ross had previously owned.
- In return for a percentage of partnership turnover, the hotel provided various services to guests of the cottages such as meals and reception services.
- Other services provided to guests included a welcome pack, free wifi, change of bed linen, laundry facilities and an on-site handyman.
- The partnership employed three staff members. General management activities in respect of the properties were undertaken by Mrs Ross’ daughter.
- Following Mrs Ross’ death a claim was made for business property relief on the basis that the business should be looked at in the round - the majority of costs incurred related to the holiday lettings and not the investment in the properties, and this together with the level of non-investment related services being provided, should be sufficiently significant to overcome what was otherwise an investment activity.
The FTT decided that it is necessary to step back and look at the business in the round, however, the test is a qualitative test of the nature of the business, not merely a quantitative test about the extent of the activities carried out by those who run it, and therefore an overly formulaic approach should be discouraged.
The essence of what was being provided here was the right to rent land in the form of one of the cottages for a specific period. Whilst the appellants provided a higher level of services with their furnished holiday let accommodation than in previous cases heard by the tribunal, (such as Anne Christine Curtis Green v HMRC [2015] TC04519 it was not sufficient for the activity to be classed as business activity rather than as investment activity.
The appeal was therefore dismissed.
Comment
This case seems to reinforce the decision in the Green case that the mere existence of multiple properties will no longer be sufficient for holiday lets to qualify for BPR but like Green, as an FTT case it is not case precedent.
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Executors of The Estate Of Marjorie Ross (Deceased) v HMRC [2017] TC05959
