View the article online at http://citywire.co.uk/money/article/a571198
Holiday let owners in inheritance tax court victory
Holiday home owners who rent their property have won a victory over the taxman in a dispute over business tax relief.
A landmark court case will allow holiday home-owners who let their properties to claim business property relief and reduce their inheritance tax (IHT) bill.
However, a tax tribunal dismissed the taxman’s argument that furnished holiday lets should not be considered a business for IHT purposes, and that relief should only be given when the owner had substantial involvement with the holidaymakers.
HMRC argued that ‘an intelligent businessman would not consider them [holiday lets] to be investments’.
Following the ruling, holiday lets will now be able to claim business property relief, which in turn provides relief from IHT on the transfer of relevant business assets on death.
Although the ruling concerned a UK property, it could have implications for those who let properties overseas.
Stephen Barratt, private client director at accountants James Cowper, said the ruling was particularly interesting as there was no clear evidence that the owner had substantial involvement with the holidaymakers – part of HMRC’s rules for deciding on the relief.
‘While HMRC can be expected to take their arguments to the Upper Tier Tribunal, as it stands, however, the decision is good news and could open the door to a flood of claimants who have been awaiting the verdict. It could also give people greater certainty in planning their affairs,’ said Barratt.
He added that those who have overseas properties could find they can make claims and urged those with holiday lets to maintain proper records to allow them to claim the relief at a later date.
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by Michelle McGagh on Mar 11, 2014 at 14:49