Do Holiday Lets Qualify for IHT Relief?

by Nick Latimir, Solicitor and Probate Manager

If you would like to discuss Inheritance Tax and how RRL can help you, please contact our Tax Partner, Steve Maggs, on 01872 276116 / 01736 339322 or steve.maggs@rrlcornwall.co.uk.

Go back to all articles

A recent breakthrough tribunal case for holiday let owners indicates that a valuable Inheritance Tax relief, known as Business Property Relief (BPR), may be available if certain conditions are met.

BPR provides relief from Inheritance Tax on the value of business assets at a rate of either 50% or 100% and is therefore extremely valuable from a business owner perspective. A guide to what qualifies for BPR is available on HMRC’s website here.

However, BPR is not available on business assets where the business is one which predominantly holds investments or deals in securities, stocks or shares, or land or buildings.

Previously, furnished holiday letting has been considered as mainly an investment based activity, despite the provision of services, and consequently, BPR was not available. The recent case, which centred on holiday letting accommodation on the Isles of Scilly, is a departure from this view, with the Tax Tribunal finding that the additional services provided were similar to those of a hotel and the valuable tax relief was therefore available.

Despite this good news, it must be noted that this is only a First Tier Tribunal decision and HMRC are likely to look to have it overturned. Further, the services provided in this particular case were exceptional, including the provision of a pool, sauna and bikes for guests. The Tribunal commented on the “personal care lavished upon guests” and holiday let owners need to ensure that they are taking advice to maximise chances of qualifying for BPR.

 

This publication has been prepared by Robinson Reed Layton LLP. It is to be treated as a general guide only and is not intended to be a comprehensive statement of the law or represent specific tax advice. No liability is accepted for the opinions it contains, or for any errors or omissions. All rights reserved.