Inheritance tax Relief for Furnished Holiday Letting?

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A recent Tribunal has decided that the activity of Furnished Holiday Letting, even when carried on in a modest scale, can amount to a business property for the purposes of Inheritance Tax Business Property Relief (BPR). The decision, although not binding, challenges HMRC’s published guidance.

In order for a furnished holiday letting to qualify as relevant business property:

  • There must be a business carried on.
  • It must be carried on for a gain.

It must not be a business consisting wholly or mainly of “holding investments” (paraphrasing parts of section 105 IHTA 1984).

HMRC v George & Loochin (Stedman’s Executors)[2004] STC147.

Nicolette Vivian Pawson (Deceased) v HMRC [2012] UKFTT TC01748

The appeal was allowed as the Tribunal had “no doubt that an intelligent business man would not regard the ownership of a holiday letting property as an investment as such and would regard it as involving far too active an operation for it to come under that heading.”

HMRC changed their guidance on the availability of BPR for furnished holiday lets only fairly recently. It will be of great interest to see whether it will appeal this case.

If you own a furnished holiday let and are worried about getting into trouble with the HMRC then you should contact one of our Financial Planning Consultants, at Pareto Lawrence we offer both Financial and tax planning advice to corporate and private clients.

About Ray L Best

Ray Best has had over 30 years experience of advising on complex financial matters. A published author of a number of books including “Partnership and Shareholder Protection”, Inheritance Tax Simplified”. We provide an initial meeting at no cost and only engage with clients when we can add significant value.

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