HMRC has won its appeal against a decision of the First-tier Tribunal that a holiday let cottage qualified as relevant business property for the purposes of the inheritance tax business property relief (‘BPR’).
The Upper Tribunal looked at the business in the round and decided that the business consisted mainly of holding the cottage as an investment so that it did not qualify for BPR.
Many owners and their advisers have put tax planning solutions on hold pending this decision which unfortunately highlights the nebulous quality of the statutory test and leads to uncertainty as to whether the relief will be available as each case will be determined on its particular facts.
What is certain is that there will be greater scope for arguing that a business is largely non-investment, and attracts the relief, where it is diverse, for example a hybrid business or encompasses mixed activities. Where, as in this case, the business simply involved letting a building the task will be very much harder.