Can An FHL Business Qualify For Business Property Relief?
What are the circumstances where it can?
POSTED BY HELEN BEAUMONT ON 17/08/2018 @ 8:00AM
Business Property Relief is one of those things that many Furnished Holiday Lettings businesses try to claim, but nearly always get refused. But we had a new tribunal case recently where the business did qualify ...
Does your Furnished Holiday Lettings business qualify for Business Property Relief?
copyright: davidionut / 123rf stock photo (licensee)
I wrote about it previously in my blog post called Business Property Relief And Furnished Holiday Lettings from September 2017. That concerned the judgement in HMRC vs Ross in regard to Furnished Holiday Lettings.
HMRC won on the ground that although the business provided services to the guests, it was an investment business so didn't qualify for Business Property Relief on the Inheritance Tax payable on the owner's death.
The case was a setback for property investors. Whilst in some situations it may be possible to provide even more services to ensure that the business qualifies for BPR, this case demonstrates that the 'trading activity' hurdle is a difficult one to cross.
"However, a new case has gone to tribunal and won!"
Mrs Graham ran a Furnished Holiday Lettings business on the Isles of Scilly. It comprised of four self-contained, self-catering cottages which were part of the overall farmhouse estate where she lived.
Both Mr and Mrs Graham had renovated the farm during the 1970's and run a B&B, a hotel and then a Furnished Holiday Lettings business from the property. When Mr Graham died in 2007, their daughter Louise joined to help with the running of the business.
On Mrs Graham's death, HMRC said that it was an investment company, interested in getting a return from the property itself, however, the daughter, Louise Graham appealed. She won because apart from letting out the cottages, they had a swimming pool, sauna, games room, croquet lawn, bicycles for hire, and a barbeque area, as well as a laundry room.
In addition, Louise would offer help and advice to her guests, was available 24/7 for emergencies and was even called out to rescue guests when they got lost on the island and needed to get back to their cottage.
According to the tribunal, Mrs Graham and Carnwethers was an exceptional case which just about reached the 'non-mainly-investment' side of the line. Deciding factors included the pool, the sauna, the bikes, and in particular "the personal care lavished upon guests by Louise Graham and her mother".
So, in conclusion, the difference was in the nature and quality of the services and care offered by the owners rather than it just being a property investment that they let out. Hotels qualify for Business Property Relief so there is clearly a line that a tribunal would aim for when looking at awarding BPR for Inheritance Tax Purposes.
"Would you like to know more?"
If you'd like to talk about Business Property Relief for your Furnished Holiday Lettings business then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.
Until next time ...
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Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen’s specialist knowledge in tax planning and experience ensures every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.