The First Tier Tribunal has in recent months passed judgement on another case relating to the application of Inheritance Tax Business Property Relief (BPR) relating to furnished holiday letting businesses. The case, (Anne Christine Curtis Green v HMRC  UKFTT 236 (TC)) appears to be yet another nail in the coffin of BPR for basic holiday lets. The case also shows that the tribunal will draw a fine line between investment and non-investment properties when determining the applicability of BPR to a furnished holiday lettings business.
Mrs Green ran a business letting five self-catering holiday units in Norfolk. She made a number of transfers, chargeable to inheritance tax. She claimed BPR on these transfers on the basis that they constituted transfers of “relevant business property”
The relevant legislation in this area states that a business is not “relevant business property” if it consists wholly or mainly of making or holding investments. There have been a number of cases over recent years in this area and the case of Best v HMRC  UKFTT 77 (TC) is considered to summaries the main principles well. These include;
o The various activities involved in operating a business relating to the exploitation of land may be allocated by “investment” and “non-investment” activities. The question to be considered is whether the investment element is predominant;
o The point at issue concerns the relative importance of non-investment activities to the business as a whole;
o Property management is part of holding property as an investment. This includes finding occupiers and maintaining properties as an investment. It does not include additional services or facilities provided to occupiers.
In Mrs Green’s case, she marketed the holiday lets via the internet and brochures; she took bookings online and by telephone. She provided the use of linen, towels, WIFI, Kitchen equipment and other items to her guests. Mrs Green also provided her guests with a welcome pack and the accommodation was cleaned between guests, a caretaker was also available for emergencies.
• The Tribunals decision
The Tribunal took the view that investment activities included marketing, booking accommodation, dealing with complaints, insurance, maintenance and repair and general pricing. Non-investment activities included the provision of electricity, linen, towels and furniture, cleaning services and supplying a welcome pack.
The Tribunal felt that in Mrs Green’s case, the extra (non-investment) services were relatively minor and ancillary to the provision of the accommodation and its advertising and maintenance.
Because the investment activities greatly outweighed the non-investment activities the Tribunal held that BPR was not applicable to the furnished holiday lettings business operated by Mrs Green.
It seems clear that this case follows the rationale of Best and is yet a further nail in the coffin of BPR for basic holiday lets. The case does however further clarity of where the tribunal now draw the line between investment and non-investment activities.
Our team of expert agricultural solicitors at Myerson Agriculture are able to advise on the applicability of BPR as well as business structures to assist the tax efficiency of your business.