Graham (Deceased) v HMRC [2018] WTLR 911

WTLR Issue: Autumn 2018 #173

GRAHAM (DECEASED)

V

HMRC

Analysis

The deceased owned a property, Carnwethers, on the Isles of Scilly, from which she ran self-catering holiday accommodation business, as well as occasional bed-and-breakfast accommodation. There were four self-catering apartments which were well-furnished and provided with numerous additional amenities, and particularly assiduous concierge assistance from the owners. On her death HMRC issued a notice of determination refusing business property relief on any of the value of Carnwethers on the basis that the business consisted mainly of the holding of an investment.

The deceased’s personal representatives appealed to the First-Tier Tribunal.

Held (allowing the appeal)

1)Investment has the meaning an intelligent businessman would give to it. A property can be an investment even if the person holding it takes active steps in connection with it as part of the business. Property management is part of the business of holding property as an investment, but a business conducted in a shop or a hotel is not a business consisting wholly or mainly or holding investments (para.56)

2)The question to be asked is whether the business is mainly one of holding investments: see Vigne v HMRC. Where the business includes an investment component, the question is whether the non-investment components outweigh it. When answering that question, aspects of the business ancillary to the holding of the investment are not to be agglomerated with the investment component; they are to be viewed separately and as part of the whole (para.71).

3)It will only be the exceptional letting business that falls on the non-investment side of the line. However, the activities of providing utilities, food and drink, flowers, bikes, fish, furniture, linen, ancillary bed-and-breakfast accommodation, barbecues, and lavish personal care were not investment activities. The provision of a swimming pool, sauna, games room and an outstanding garden involved partly an investment activity and partly additional services. In the circumstances, the business was closer to a family-run hotel than a mere holiday let.

JUDGMENT CHARLES HELLIER Introduction [1] Carnwethers is an enlarged old farmhouse standing in grounds of about an acre some five minutes walk from the coast in St Mary’s in the Isles of Scilly. It was owned at the time of her death on 6 November 2012 by Grace Joyce Graham 
(Mrs Graham) and was her …
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Counsel Details

Louise Graham for the appellants.

Simon Bracegirdle (HM Revenue & Customs Solicitor’s Office, South West Wing, Bush House, Strand, London WC2B 4RD) for the respondents.

Cases Referenced

Legislation Referenced

  • Inheritance Tax Act 1984, ss104, 105