fbpx

Tribunal Excludes Furnished Lettings Business from Inheritance Tax Relief

23rd April 2021 By

In a ruling of interest to anyone engaged in renting out furnished properties, the First-tier Tribunal (FTT) has taken a restrictive approach to the circumstances in which such enterprises may qualify for Business Property Relief (BPR) from Inheritance Tax (IHT).

The case concerned a house set in scenic grounds which had been converted into five flats. The owner and occupier of one of the flats also owned three of the others which he rented out as furnished holiday accommodation. Following his death, his executors’ claim for BPR in respect of the lettings business was rejected by HM Revenue and Customs (HMRC). With more than £220,000 in IHT at stake, the executors challenged that decision before the FTT.

The executors pointed out that the flats were advertised widely for rent in the press, on the internet and via a dedicated website. They were let on a short-term basis to holidaymakers, festival-goers and wedding guests who made use of the grounds. The man and his wife were heavily engaged in the business, expending more than 1,200 hours on managing it annually. It was argued that the business was akin to that of running a hotel or motel.

Dismissing the appeal, however, the FTT preferred HMRC’s arguments that the business mainly consisted of holding or making investments. As such, it was excluded from the benefit of BPR by operation of Section 105(3) of the Inheritance Tax Act 1984.

The FTT noted that investment activities associated with the business included the provision of the accommodation, parking spaces, fixtures and fittings, together with the performance of repairs and maintenance and such administrative tasks as dealing with bookings and advertising.

Incidental or ancillary activities, such as the provision of utilities, appliances, kitchen utensils and consumables, were an integral part of the investment activity of providing the accommodation. Non-investment activities, including the provision of books and leisure equipment to guests, were so insignificant as to be negligible. Overall, the lettings business fell firmly on the investment side of the line and BPR was therefore unavailable.

Source: Concious

Latest News

Company Owner's Negligible Value Claim Unsuccessful

29th April, 2024 By

When an asset falls in value to the point that it is almost worthless, it may be possible to make a negligible value claim under Section 24 of the Taxation of Chargeable Gains Act 1992. The asset will then be treated as if it had been sold and immediately acquired again, so that the loss can be set off against other income. For a claim to succeed, however, the asset must have become of negligible value during the time the claimant owned it. On 30 September 2017, a woman who...

Court Sanctions Leg Amputation for Man Lacking Mental Capacity

24th April, 2024 By

The courts are often called upon to sanction treatment for patients whose ability to make decisions for themselves is impaired. In a recent case on point, the Court of Protection had to decide whether it was in the best interests of a man with mental health issues to have his right leg amputated above the knee. The man, aged 60, was taken to hospital by his niece. He was found to have an ulcerated leg. He had a history of paranoid schizophrenia, and believed that the sores on his leg...

High Court Grants Parental Order Despite Previous Adoption

18th April, 2024 By

In law, adopted children are regarded as having been born to their adoptive parents. The Family Division of the High Court recently considered whether that fact precluded a parental order being granted under the Human Fertilisation and Embryology Act 2008 (HFEA) in respect of a child born via surrogacy. A couple who lived in the USA had entered into a surrogacy arrangement with another woman. An adoption order naming the couple as the child's parents had been made by a US court and was automatically recognised under UK law. However,...

Flat Owner Not Liable for Pre-existing Structural Issues

16th April, 2024 By

When building owners carry out works on their property, are they liable for damage to adjoining properties that results from pre-existing structural issues? The Court of Appeal recently provided welcome clarification on that question. The owner of a ground-floor flat wished to extend it by building out into his garden. He served notices on owners of adjoining properties, as required by the Party Wall etc. Act 1996. The works caused the rear wall of two adjoining properties to drop by about 2 mm, which led to internal walls and floor...