Private client practitioners will welcome the latest clarification from the first-tier tax tribunal on when BPR is available on holiday lettings – an area of continual confusion. In this article, the author explains the background, and the key points from the ruling – notably the applicable principles derived from two previous rulings:
- Investment is not a term of art but has the meaning an intelligent business person would give to it; such a person would be concerned with the use to which the asset was being put and the way it was being turned to account.
- A property may be held as an investment even if the owner has to take active steps in connection with it.
- Land is generally held as an investment where gain is derived from payments to the owner for the use of the property.
- However, there is a wide spectrum, at one end of which is the exploitation of land by the granting of a tenancy. At the other end is the exploitation of premises as a hotel or by a shopkeeper. The land subject to tenancy would generally be an investment and any business encompassing it would therefore include holding investments, but the business conducted at a shop or hotel would not.
- Property management is part of the business of holding property as an investment so investment business activity is not limited to purely passive business. ‘Management’ includes finding tenants and maintaining the property, but not providing additional facilities earning landlords additional fees.
- A composite business must be looked at in the round – as a whole.
Practitioners are now awaiting the ruling of the Upper Tribunal in Vigne v HMRC. Graham v RCC [2018] UKFT 306 (TC). Source: www.lawgazette.co.uk.