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Inheritance Tax and Rented Holiday Accommodation: Update- 01/09/2009
Rented holiday accommodation is a valuable source of income for many farmers and people involved in the rural economy. Where cottages, flats and barns have been let for holiday purposes from an Inheritance Tax point of view Business Property Relief has been made available at the appropriate rate of 100% or 50%. However, the letting needs to be seen as a business and not purely investment income by way of rented property.
Although the Government’s tax legislation has not altered on this point, it appears that the approach being taken by HM Revenue and Customs is tightening. As with other forms of tax the Revenue are looking to interpret the legislation in a manner which brings more property within the tax bracket.
Even though the owner may well employ agents to deal with the letting and agents to deal with the management of the letting which may include services such as laundry and welcome food packs, nevertheless, the Revenue are arguing cases such as these may have insufficient services provided with the business so that it is nothing more than investment income.
Careful attention does have to be given to make sure that sufficient owner involvement is maintained and level of services provided with the business to gain Business Property Relief and as with many of the taxes at the present time the goalposts are continually being moved.
Detailed records of the owner’s running of the business need to be kept, and it is important to stay in touch with your accountant and lawyer to see what you can do to maximise the chances of keeping Business Property Relief available.