Judge Richard Barlow decided on 12th December 2011 that a deceased person’s 25% share of a property in Suffolk which was let out to holidaymakers constituted a business not an investment and would therefore qualify for 100% relief from inheritance tax, thus saving the beneficiaries 40% of the value of the property at date of death.
It has long been HMRC’s view that, unless substantial services are included in respect of a let property, it will not qualify for the 100% relief. This “First Tier Tribunal” (FTT) decision has now clarified that the provision in respect of a profitable letting of a package which included cleaning, laundry, heat and light and TV fulfils this criteria and can be treated as substantial.
It was expected that HMRC would have appealed this decision made by the lowest of the four tiers of tax courts but they have not done so and their deadline has expired. This may encourage holiday home owners to increase the letting of their properties to 70 days a year and otherwise qualify as a “furnished holiday let” in the hope that they will be able to hand down the full value of their properties to their descendants free of tax. HMRC may however still argue that the relief is not due and a decision by FTT does not constitute a binding precedent.
Watch this space...
For further information/advice on this topic please contact Ward Williams (www.wardwilliams.co.uk)
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