The tax team at Lang Bennetts Chartered Accountants is notifying clients of an important and unexpected win against HMRC in a case concerning Business Property Relief (BPR) on furnished holiday accommodation.
The case follows the death in 2012 of Mrs Grace Graham, owner of four self-catering properties at Carnwethers on St Mary’s, Isles of Scilly.
Mrs Graham had initially run the business with her husband Roy – first as a bed and breakfast establishment, then as a country house hotel and latterly, from 2003, as self-catering holiday lets. When Mr Graham died, his wife continued to run it with their daughter, Louise.
The Grahams took pride in going out of their way to give guests their personal attention. This included regularly arranging to bring back food for them, organising shopping deliveries and even putting the groceries away when their visitors were out. They also provided additional services like a fully equipped games room, a swimming pool with poolside furniture, exceptionally well-maintained gardens, a sauna, croquet lawn, barbecue areas and bike and buggy rental.
When Mrs Graham died, her daughter submitted a claim for BPR as part of her Inheritance Tax (IHT) account, on the basis that the business she was running was relevant business property – and not therefore chargeable to IHT. HMRC disagreed so Louise Graham successfully appealed the decision at what is known as the First Tier Tribunal (FTT).
“Until now, it seemed that BPR for property on death would only be available for furnished holiday lets that sit firmly at the hotel end of the holiday accommodation spectrum,” said Lang Bennetts tax team manager Daniel Orasnjak. “This ruling does offer a glimmer of hope to business owners offering guests significant additional services beyond basic property rental – though we fully expect HMRC to try and get the ruling overturned.
“It’s an interesting development and one which we’ll be keeping a very close eye on.”