In a disappointing decision, the taxpayer in HMRC vs Nicolett Vivian Pawson (Deceased) [2013] UK UT050(TCC) has been refused leave to appeal the decision given by the Upper Tier Tax Tribunal (“UTT”) earlier this year.

The UTT decided that the activities undertaken in conjunction with running the property business were typical of the type undertaken by an investment business and that, for IHT purposes, it was therefore a business that consisted wholly or mainly of holding investments.  This means the house will be chargeable in the deceased’s estate as no business property relief will be available (BPR).

This really was not an ideal case to have taken to the Tribunal and it is highly probable that HMRC will now strongly resist claims for BPR in cases where a furnished holiday let business, even where it includes a small number of properties, is included in an estate.

At the First-tier Tribunal, the Tribunal held “no doubt that an intelligent businessman 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”.  However, this decision has now been overruled by the UTT, which denies the relief.

Taxpayers must now provide as many additional services as possible that may be regarded as non investment activities, which might include services such as laundry and cleaning, provision of meals, welcome packs and the arrangement of holiday activities, to try and tip the balance, although this will be difficult.

HMRC operates a non statutory clearance procedure for furnished holiday let owners which may be used to agree whether BPR is due on their business or not.  If you require any further information or have concerns over your own holiday letting property, please do contact us.

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