Inheritance Tax – Holiday lets are entitled to business property relief, says tribunal
The First Tier Tribunal has rejected an attempt by HM Revenue & Customs to treat a holiday letting cottage as an investment and thus deny it business property relief from IHT.
In a recent case the tribunal ruled that a holiday let was too active an operation to be an investment and no intelligent businessman would treat it as anything but a business asset.
The tribunal found that:
- The exploitation of the property as a holiday letting cottage amounted to the operation of a business for more than two year before the person’s death.
- Even though it was not consistently profitable, the business was conducted with a view to gain and therefore satisfied the “for gain” requirement in section 103(3) of IHTA 1984.
- The business did not consist wholly or mainly of holding investments so as to be excluded from the term “relevant business property” by the operation of section 105(3) of IHTA 1984.
We understand that the HMRC held back a number of other similar cases pending the tribunal’s outcome. Therefore the decision has been widely awaited and will attract considerable interest.