Reproduced from Accounting Web:
HMRC recently updated its IHT manual: it is not sure whether business property relief applies to furnished holiday lettings.
IHT business property relief is not available where a business is one which consists wholly or mainly of dealing in land or buildings or making or holding investments.
Furnished holiday letting is specifically treated as a trade for income tax purposes and it is assumed that it will also qualify as a qualifying business for capital gain tax entrepreneur’s relief. It has generally been agreed in the past that providing that services are actively provided in conjunction with furnished holiday letting that IHT business property relief will apply too.
“In the past we have thought that business property relief would normally be available where:
* the lettings were short term, and
* the owner, either himself or through an agent such as a relative, was substantially involved with the holidaymakers in terms of their activities on and from the premises.
Recent advice from Solicitor’s Office has caused us to reconsider our approach and it may well be that some cases that might have previously qualified should not have done so. In particular we will be looking more closely at the level and type of services, rather than who provided them.
Until further notice any case involving a claim for business property relief on a holiday let should be referred to the Technical Team (Litigation) for consideration at an early stage.”