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Business Property Relief

Many people dream of owning a place in the sun, or a country retreat, often as a second property. One way of financing this is through lettings – a relatively straight forward process and concept, and one where most people would expect to pay tax on the income. However, at what point does a simple holiday home /buy to let, become a bona fide business with appropriate ‘tax breaks’?
HMRC’s usual position is that most people own holiday lets as investments in the underlying land rather than as an income-generating businesses like hotels or Bed and Breakfast accommodation so no BPR is available. This view was supported by the Court of Appeal in the George case in 2004 and in McCall in 2009 so seemed fairly settled.
Recently however the First Tier Tax Tribunal case of Graham held that there is a spectrum of such accommodation with basic letting at one end and hotel keeping or letting combined with the provision of other activities and services at the other. Guests to Mrs Graham’s lettings were provided with many other services such as a pool, sauna, bikes and generous personal care. The First Tier Tax Tribunal agreed that therefore the land was not held mainly for investment purposes and granted BPR to the estate.
To paraphrase that in simple terms, renting out a holiday home is not per se eligible for BPR: renting a home where there are additional revenue-generating services such as bike hire, swimming lessons, payable sauna/spa can potentially qualify for BPR
Whilst highly subjective in judgment it is the type and quality and extent of services provided above and beyond the accommodation that will clinch the argument.

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