Business Property Relief (BPR) can provide Inheritance Tax Relief on business assets at a rate of 50% or 100% of their value. This relief can be very valuable but to support a claim HMRC require the business to be a trading business: defined as not wholly or mainly dealing in securities, stocks or shares, land or buildings or in the making or holding of investments.
Historically, BPR has been denied to businesses that essentially let out land as this is deemed an investment and not a trading activity. Therefore, BPR would typically be denied on DIY liveries, as this is usually just the letting of a stable with some grazing, and any grass liveries where only grazing rights are provided.
The matter as to whether a business is trading or not is more of a grey area when it comes to part and full liveries with a range of services provided. We have recently seen an increase in the denial of BPR on furnished holiday lets on the basis that HMRC view them to be a letting of property, even with multiple services provided. It is therefore surprising and pleasing to hear that HMRC’s decision to deny BPR on a DIY/ part livery business has been overturned by the First Tier Tribunal (FTT).
The case
The late Mrs Vigne owned 30 acres of land from which she provided livery services. As well as providing stabling and grazing for her livery clients she provided the following services:
- The provision of worming products, including administering them where and when necessary, on a quarterly basis.
- Providing the horses with feed during the winter months.
- Removal of manure from the fields.
- Undertaking a daily check of each horse.
HMRC initially denied BPR but this was overturned by the FTT as they considered that the Vigne’s livery business was not “wholly or mainly” that of “holding investments” due to the additional services provided to the horse owners meaning that the business was more than a DIY livery. They also considered the level of care Mrs Vigne provided and the responsibilities she undertook and said that there was no doubt that the business was a genuine livery business, developed so as to be a recognisable livery business offering significantly more than the mere right to occupy a particular parcel of land.
This decision demonstrates that livery business can qualify for BPR. However, it does appear to contradict recent legislation concerning furnished holiday lets whereby, with even significant levels of services provided, the letting of the accommodation itself is still considered to be a business of wholly or mainly of holding of investments. It is therefore not surprising that HMRC have appealed the decision made by the FTT with the hearing scheduled for 13 July 2018. We await the outcome and will report in due course.
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