So the long awaited decision from the Upper Tier Tax Tribunal has been released in the NMRC v Executors of Pawson.
HMRC sought to deny Business Property Relief on a holiday cottage. At the First Tier Tribunal ruling the decision went in the taxpayers favour, with the tribunal ruling there was sufficient activity to make the holiday letting a business.
HMRC were given leave to appeal on the grounds that the FTT had erred on the basis that;
It formulated and applied the wrong test in assessing whether the Property was held wholly or mainly as an investment.
Needless to day HMRC won the appeal, details can be found here. HMRC v 1 Lockyer 2 Robertson for Nicolette Pawson
What does this mean for holiday cottages?
The obvious answer is no inheritance tax relief. For many farmers however Business Property Relief may be available if the holiday cottage is part of a mainly trading business, i.e. a farm. In most cases holiday cottages, like bed and breakfast facilities, have been moved outside the farm business in order to avoid VAT registration.
So to attract Inhertiance Tax relief will farmers and others have to give up the benefit of not being registered for VAT, effectively increasing the price of their property?
More information will be posted on http://www.doddaccountants.co.uk/ on Monday
You can follow Rob on twitter @Rob__Hitch
