A Successful BPR Claim for FHL Business

ASSC Trade Suppliers, EQ Accountants, have reported before on tax tribunal cases which have gone against the taxpayer, namely Pawson and more recently Ross, denying inheritance tax relief in the form of Busienss Property Relief (BPR) on the basis that a furnished holiday letting (FHL) business was mainly a business of holding the investments.

It is pleasing, therefore, to be able to report on a case heard before the First Tier Tribunal (FTT), the Personal Representatives of Graham (Deceased) [2018], which had a successful outcome for the taxpayer.

Mrs Graham died in 2012, up to which point she ran a business which involved the provision of four self contained flats or cottages. HMRC had challenged the claim for a deduction for BPR on the value of these business assets by issuing a Notice of Determination and Mrs Graham’s daughter had appealed against that Determination.

Mrs Graham, with her husband, who had pre-deceased her, had first run a bed and breakfast business from the premises, then a country house hotel. In 2003 they realised that there was increasing demand for self catering accommodation so converted the property into units for that purpose, with their family home forming part of the building also.

The facilities available to guests included the use of a games room, bicycles, a sauna, laundry, a BBQ area and a heated swimming pool. Guests were greeted with refreshments on arrival, welcome pack and ‘What’s On” guide for the area for the week. Each property was well equipped with furniture, linen and consumables (tea, coffee, toilet rolls, soap etc) with extra towels provided for the pool.

Mrs Graham, and subsequently her daughter who helped her to run the FHL business, made a point of being available to guests and regularly provided advice, ideas and assistance to guests as required during their stay.

Overall the FTT concluded that this was an exceptional case which did, just, fall on the not mainly holding investments side of the line. The range of facilities available to guests and the personal care lavished on guests by the proprietors distinguished it from other ‘normal’ actively managed FHL business.

The taxpayer was therefore successful with their claim for BPR in this case.

This is great news for owners of FHL businesses, especially where a high level of service can be demonstrated to support a case for BPR.

If you would like to discuss this case and how it relates to your business, please get in touch with EQ Accountants.