News

A tribunal has ruled in favour of business property relief (BPR) applying to a cottage used as a holiday let.
The tribunal decided that the cottage would qualify as “relevant business property” for the purposes of Part V, Chapter 1 of the Inheritance Tax Act 1984.
The facts of the case briefly are that Mrs Pawson owned a 25% share in the cottage known as Fairhaven when she died on 20 June 2006. Initially HMRC refused the claim for BPR on her share of the cottage and therefore her executors appealed against the decision.
The property is situated on the Suffolk Heritage Coast. It is a large bungalow which overlooks the sea. It can accommodate 11 people and is set in its own grounds of about 0.4 of an acre.
Most years the income generates a profit although there was a loss one year when expenditure was incurred in improving the property.
Members of the family do occupy for 3 weeks during the holiday season. They paid to occupy the property, paying the amounts calculated by HMRC’s literature for private use.
A cleaner and caretaker were employed. Cleaning materials are replenished after about 1 in 3 lettings. The property is fully furnished and lettings were handled by the family.
The tribunal found as follows:
“We have no doubt that an intelligent businessman would not regard the ownership of a holiday letting property as an investment as such and would regard is as involving far too active an operation for it to come under that heading…He would consider it to be a business asset to be exploited as part of the provision of services going well beyond an investment as such”.
For further information, please contact Alison Hall on 0191 232 8345 or email alison.hall@hay-kilner.co.uk