TAX RULING BOOSTS UK HOLIDAY LET OWNERS (09/03/12)
Owners of holiday property can now claim inheritance tax for Business Property Relief (BPR), following a court decision.
The full value of holiday let assets transferred after an owner's death can be claimed through BPR to avoid inheritance tax.
The First-Tier Tax Tribunal has dismissed HMRC’s argument that furnished holiday lets should not be considered a business for IHT purposes. It ruled that “an intelligent businessman would not consider them to be investments”.
Holiday let owners could now be in line for a tax windfall. HMRC had sought to categorize the holiday let with other buy-to-let and rental property, and to charge IHT on the owner’s death accordingly.
HMRC's own guidance states that relief is only to be given where the owner was substantially involved with holidaymakers but this was not accepted.
Those with overseas property that they let out such as a villa in Spain could also find that they will be able to make a BPR claim as well. Maintaining proper records and filing accounts with HMRC will be important in preparing the way for a claim to relief, as well as to avoid penalties following the initiative started at the end of last year which has seen inspectors starting to clamp down on unpaid tax on overseas properties
However, people must still be stringent, as the HMRC are expected to appeal the ruling.
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