Licensing of property - is ER available

Rent is rent

according to Salisbury House Estates v Fry, which established that the taxing schedules are mutually exclusive.  Of course they have gone now but the same principle applies, so I think that if the rental income has been subject to NIC then that was wrong.

ER, however, is a different matter.  The relief applies to 'relevant assets' which are assets used for the purposes of a 'business', which must be a trade, profession or vocation.   In deciding whether a company is a trading company we still have with us the test of whether other activities are 'substantial' based on HMRC's 20% rule of thumb.  However, there is no such yardstick in the case of an unincorporated trader, so, it seems to me, a question of fact whether the property is part of one business or is a separate rental activity.  The Farmer's Exors case may be relevant - which concerned IHT BPR - one must look at the business as a whole.  It sounds to me as if the rental activity is part of one business, from what you say, which is (I assume) predominantly one of trading.  However, I couldn't put my hand on my heart and give a definitive answer.  Kevin Slevin is your man if you want one.   I don't have his book so I don't know if he covers the point but I've no doubt that he's considered it.

kmtaxconsultant.co.uk

To be honest ...

... probably not but I don't know, or at least not without considering and even then may not be able to pin down definitely.

Relevant business assets are assets which were in use for the purposes of the trade effectively.  The definition does not say that they must not be used for anything else.  However, certain assets are excluded i.e. assets held as investments.  I expect that HMRC would say that the asset was held as an investment given only minor trade use.  Whether that is right may depend on the precise facts.  We are a bit in the dark here as this is untested legislation.  Some of the retirement relief case law may be of relevance.  I seem to recall that if you had a property that was partly used for business and partly let, say, the relief was restricted but if part was not use at all it wasn't, however there is no provision for restriction of ER to part of an asset.  'Investment' is not defined so it must take it's natural meaning.  I take it your client simply rents out the snooker hall rather than operates it himself as that would be trading not rental activity.  Perhaps a wholly or mainly test would apply as in the BPR case of Farmer's Exors, the caravan parks cases in which case you'd lose! 

Actually ...

.... something was niggling me about this i.e. the situation where the property is let to a company and relief restricted under s169p.  However I don't think it makes any difference.   S169P also applies where only part of an asset has been used for the purposes of the business, but S169P is concerned with 'associated disposals' so is only relevant where there is a disposal associated with a material disposal of business assets.  But an associated disposal only relates to the disposal of an interest in assets of a partnership or of shares in a company.  So as I see it the associated disposal rules have no application here.  In which case we are back to S169I.  There has been a material disposal i.e. of assets in use at the time the business ceases (I assume it will cease on disposal) but the question remains as to whether the property was exluded from being a relevant business asset because it is held as an investment. 

kmtaxconsultant.co.uk