A beneficiary who inherited their father's furnished holiday accommodation business has failed to convince the First-tier Tax Tribunal that it qualified for Business Property Relief (BPR). If it had qualified, the estate would have benefitted from 100% relief on the business value saving Inheritance tax (IHT) of around £250,000.
Investment or business property?
This is not a new scenario; there have been many cases over the years involving furnished holiday letting businesses and BPR. HMRC takes a strict view on what is regarded relevant business property and which businesses consists wholly or mainly of "making or holding investments" in which case a claim would be denied.
In this case, a converted manor house on the east coast of Scotland was let out as holiday apartments. The deceased had owned and managed the business until his death at which point it passed to his children who were also the executors of his estate. The executors attempted to persuade HMRC that the guests staying in the holiday accommodation benefited from much more than just a place to stay with the provision of laundry services, therapies, sports equipment, tennis courts, use of the gardens and arranged visits to local restaurants etc. HMRC was not won over by the argument however and an attempted comparison to an exclusive hotel was said not to be realistic by the First-tier Tax Tribunal.
Get in touch – we're here to help
When a claim for business relief is unsuccessful, it is denied in its entirety and can result in a significant and unexpected IHT liability. If you would like to discuss any of the matters raised in this blog in connection your business, please get in touch with our Private Client Team.
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