Court of Appeal Sets Aside Financial Remedy Order
The Court of Appeal has upheld a man’s argument that the financial remedy order made on his divorce should have been set aside because the wife had given inaccurate evidence...
Continue readingThe shock result of a recent tax case will send reverberations around the furnished holiday letting (FHL) industry, after the court reset the bar regarding the level of service provision that has to accompany a letting for it to qualify for beneficial treatment for Inheritance Tax (IHT) purposes.
The exemption is by the application of Business Property Relief (BPR) and applies where the owner ‘plays an active part in the management’ of the ‘business’ of the FHL.
This means there are two elements necessary to be able to claim the relief. Firstly, the FHL must be a business. Secondly, the owner must play an active part in running the business.
In the case in point, the Upper Tribunal decided that the level of services provided by the owner, which included employing a gardener, cleaner and caretaker and offering laundry services for the tenants, was insufficient for the operation to qualify as a business rather than an investment.
Accordingly, the property was ineligible for BPR and therefore subject to IHT.
In addition, a number of factual criteria must be met for a property to qualify as an FHL. These were made more rigorous for the tax year 2013/14 and subsequent years. To qualify as an FHL, it is now necessary that:
HM Revenue and Customs provides guidance on furnished holiday lettings on its website.
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