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Their comments have been published below with kind permission.
Phineas Hirsch, a partner at law firm Payne Hicks Beach, said: “The Tanner case follows a long series of cases going back to 2013 in which furnished holiday letting businesses have been denied BPR.”
“This is on the basis that the income derived from such businesses largely consists of rent in return for the occupation of property – and so they are treated as investment businesses.”
“In recent years, advisors have been increasingly cautious about making BPR claims in respect of furnished holiday lets, because HMRC, and the courts, have been consistent in denying claims.”
What does HMRC say about business property relief for holiday lets?
HMRC’s view is that furnished holiday lets will in general not qualify for business property relief.
This is because the income derived from such businesses will largely consist of rent in return for the occupation of property.
Hirsch said: “BPR is not available where the business is one which consists wholly or mainly of making or holding investments. ”
The starting point when considering whether or not a business such as a holiday letting business qualifies for relief is “that the owning and holding of land in order to obtain an income from it is generally to be characterised as an investment activity…[where] such an investment could be actively managed without losing its essential character as an investment”.
Basically, Hirsch said, if the primary business is the provision of rental accommodation and the additional services are just a small part of that, HMRC and the courts will deny IHT relief.
The reason many families fall foul of the rules, however, is that HMRC admits there may be cases where the level of additional services provided by the furnished holiday letting establishment is so high that the activity can be considered as non-investment.
As such, HMRC has said, each case needs to be treated on its own facts.
