Chapter SVM111180
| Published date | 13 March 2016 |
| Record Number | SVM111180 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
IHTA84/s105(3) will not usually apply to these businesses in view of the level of services provided. This has been recognised by the courts who have distinguished these businesses from mere exploitation of land. In Griffiths (Inspector of Taxes) -v- Jackson 56 TC 583 at page 593, Vinelott J observed:
“The distinction between a hotelier or a lodging house keeper, on the one hand, and the owner of a property who lets furnished rooms and provides services is no doubt in practice a narrow one, more particularly in these days of self-service hotels and motels, but the principle is clear and in the present case there can be no doubt on which side of the line the taxpayer’s activities fall.”
Only in cases where it is clear that IHTA84/s105(3) applies should you pursue it. Any doubtful cases must be referred to the Litigation and Technical Advice Team (LTAT) before an entrenched position is taken.
There are increasing numbers of businesses providing accommodation services for various groups, such as asylum seekers or vulnerable adults. The range of services provided in these businesses can vary enormously, and you will need to examine them in detail to establish where they sit on the non-investment/investment spectrum.
The self-service/ budget hotel industry has expanded considerably since Vinelott J’s 1982 observation, and you should also ascertain the nature of a ‘hotel’ business to establish whether on the facts it actually falls at the investment end of the spectrum.
Holiday lettingsHMRC’s view is that furnished holiday lets will in general not qualify for business property relief. The income derived from such businesses will largely consist of rent in return for the occupation of property. There may however be cases where the level of additional services provided is so high that the activity can be considered as non-investment, and each case needs to be treated on its own facts.
Our view was confirmed at the Upper Tribunal in the case of Commissioners for HMRC v Lockyer and another, Personal Representatives of Pawson (deceased) [2013] UKUT 50 (TCC), which concerned a single bungalow on the Suffolk coast.
The Tribunal found that the various activities carried on, including
- the taking of active steps to find occupants,
- making the necessary arrangements with them,
- collecting payment of the rent,
- spending on repairs, redecoration and improvement of the property,
- maintenance of the garden and grounds to keep them in a tidy condition,
- keeping the property insured
were activities that fell on the investment side of the line.
Services provided, such as cleaning, the provision of heating and hot water, provision of a welcome pack, and being on call to deal with queries and emergencies, were not of such a nature and extent that they prevented the business from being mainly one of holding an investment.
In his decision, Henderson J provided a clear summary of the...
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