Representatives of G. Graham v HMRC (2018)

Business Property Relief is currently denied to businesses that ‘consist wholly or mainly of dealing with securities, stocks or shares, land or buildings, or making or holding investments’, including property lettings businesses.

HMRC will usually take the stance that people who hold holiday lets do so as investments rather than income generating businesses, such as hotels or B&Bs. In other cases, HMRC has followed this view, often forcing taxpayers into stressful and expensive disputes that can last for years.

In Representatives of Grace Joyce Graham deceased v HMRC (2018), the statute’s vagueness has been challenged. The taxpayer claimed that holding land in order to take an income should not always be considered an investment but that a ‘spectrum’ of property letting businesses was possible. She said that basic letting or leasing was at one end of the spectrum and hotel keeping or lettings provided with other activities or services were at the other.

Guests at Mrs Graham’s Isles of Scilly holiday letting business were provided with an ‘exceptional level of service and amenities’ including homemade food and drink, a pool and sauna and personal assistance from the owner.

Five years after her death, the First Tier Tax Tribunal supported the view of the late Mrs Graham’s executors, agreeing that the wide range of services provided were more akin to that of a hotel than a lettings business. The tribunal agreed that the land was not mainly held for the purposes of investment and has granted Business Property Relief to the estate.

HMRC has successfully denied Business Property Relief in a number of holiday let cases and it is thought the Graham case won’t change its general stance. It is the quality, extent and type of services provided over and above the holiday accommodation itself that will make a challenge successful.

The decision on Vigne v HMRC is now awaited, in which the judge granted business property relief for a livery business noting that ‘no properly informed observer could or would have said that the deceased was in the business of holding investments’. The decision could have wider implications for activities such as pheasant-shooting on landed estates, and it is for this reason that HMRC has appealed the Vigne finding.

Whether you’re buying property to live in or to let, get an independent building survey carried out when you purchase property by contacting your local Property Surveying independent Chartered Surveyor.


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