Business owners will no doubt be well aware of the potentially valuable relief from Inheritance Tax known as Business Property Relief. Where successfully claimed, BPR can shield the full value of a business from the charge to Inheritance Tax.
Of course, what may sound straightforward is often not – and it is not simply the case, despite the name, that any business will qualify. One key distinction made by the Revenue is between ‘trading’ businesses, which may secure the relief, and ‘investment’ businesses, which do not. The Revenue sees a spectrum of businesses: on the one hand, in their eyes, hotels offer such a level of services for the fee charged that they qualify for the relief, whereas a simple rental arrangement of a property would not. Most businesses involving land naturally fall somewhere between the two.
So where does that leave those in the middle ground?
Park owners have, frustratingly, occupied this position for many years now and the recent case of Firth v HMRC [2022] UKFTT 219 (TC) is a salutary reminder that the level of services offered is, once again, all-important.
This case saw a claim to Business Property Relief for an aparthotel business. On the services side, the guest welcome packs, food packs, linen, towels, and toiletries provided were all marked as helpful ‘trading’ services. On the other hand, though, the property was predominantly marketed and let out as short-term rentals. On the particular facts here, then, it was held that the aparthotel was more akin to a short-term letting business than a boutique hotel – and the claim failed.
Has this case changed much, then?
Essentially, no. This is a victory for the Revenue but a reminder that nothing has changed and each case will be decided on its particular facts and, of course, the services involved in the business.
But, more than that, the case does demonstrate the importance of preparation of a BPR case. The tribunal here was quick to point to the shaky evidence used to support the claim and the many assertions made without proof. For park owners and business owners, it is a reminder that it always pays dividends to consider your own Inheritance Tax-position well in advance and to take appropriate advice.
As the phrase goes (or thereabouts), proper planning prevents poor performance.
How can Tozers help?
For any further help or advice with Business Property Relief or anything covered in this insight, please contact our dedicated legal teams who will be happy to help.
