When can an individual claim business asset taper relief in respect of residential property?

When can an individual claim business asset...

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First, and most obviously, the property may be let on terms that amount to furnished holiday lettings, deemed to be a trade for taper purposes. We would expect most of our readers to have noticed that one! Deduct one mark if you hadn't.

Second, if the individual lets the property, BATR will be due if the lessee uses the property in its trade. HMRC accept that this will be the case where the lessee is a company (but we think the same would apply on a letting to an individual or partnership) and the property is made available to an employee of the lessee for a trading purpose. The examples that HMRC give include housing an employee posted on secondment or letting as "tied accommodation", but we think the relief would also apply if the property was simply made available rent-free as part of the employee's remuneration package. In these situations the property is being used solely for a trading purpose and BATR relief is due in full - there is no question of apportionment. This will also be the case if the owner of the property does not let the property at all but allows his own employee to occupy it rent-free.

Third, if the owner occupies the property himself and he uses part of the property for the purposes of a trade (whether conducted by himself, a partnership or a limited company) a measure of relief will be due. This will cover the situation of the spare bedroom doubling as an office, storage of stock in the garage etc. A proportionate part of the gain will qualify for BATR. Of course, in many cases this will be academic - the gain will often be exempt under main residence rules - but BATR will make a difference where there is business use of a second home.

Finally, (easiest to overlook and most difficult to pick up) a measure of relief will be due if the letting is to an individual who himself occupies the property and uses part of the property for a trade purpose (such as working from home, storage of stock etc as described above). Again there will be proportionate relief.

Thus in every case in which an individual sells residential property, you will need to find out if you can what business use may have been made of the property by the owner or by any tenant.
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By wdr
09th Sep 2005 15:22

If you want to explain an abstruse point, why not get it right?
You have omitted the key wording in TCGA Sch A1, para 5, which is that the property must be used wholly OR PARTLY for the purposes of the trade of the occupier.
The Revenue will find it difficult if challenged to deny relief in almost every circumstance where the tenant is a trader.
It is more useful to highlight those rare situations where the tenant is a trader , but the occupation is not for the purposes of the trade.
Two which come to mind are occupation by a participator , for whom ICTA s.418 might apply to the "benfit", and the other is where the property is itself let by the tenant, being an investment property for the tenant.

A third , even more esoteric example, is where the land is rented by a trader to provide amenity to a director-say to prevent land adjacent to his own home from being developed. The land is not occupied by the director concerned, so he is not taxed on the "benefit", but nor is the land occupied for the purposes of the trade.

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By User deleted
09th Sep 2005 10:04

And..
..your question is???

If it's ..."Aren't I clever?", the answer is 'Not sure'

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