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No IHT relief for holiday lets

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Challenging HMRC’s refusal for IHT business relief on holiday accommodation is game of tribunal roulette where the odds are stacked against the taxpayer, as Chris Williams explains.

15th Jan 2021
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It seems no year is complete without the first-tier tribunal having heard at least one doomed appeal against an HMRC’s refusal of IHT business property relief (BR) for a furnished holiday letting (FHL) business. The latest in this line of lost causes is the Executors of the Late Sheriff Graham Loudon Cox v HMRC (TC07919).

The law

The conditions for BR and the relevant restriction are succinctly expressed in the Inheritance Tax Act 1984 sections 104 and 105.

Section 104 applies the relief where:

  • the whole of the value transferred is attributable to the value of relevant business property, the whole of that value is treated as reduced by 100%; or
  • where part of the value transferred is attributable to the value of relevant business property, that part of the value is reduced by 100%. 

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By Adrian Everton
18th Jan 2021 17:55

I read with interest this article, as my wife and I jointly own a villa in Spain, which is rented out. I monitor all rentals and communicate with the tenants directly, sending keys, info, receiving and agreeing to the rent, although some are referred to us by holiday lettings web sites, to whom we pay commission. We have a bank account in Spain , which is used to pay all the expenses. I arrange the payment of all the outgoings and spend a fair amount of my time, keeping my records up to date and monitoring the situation. Do you think that I/we would qualify for BR? We have an agent in Spain who arranges the cleaning and maintenance of the gardens and I liaise with her for repairs and upkeep.

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