Hot Topic – Furnished Holiday Lets and BPR
Written by Jane Alford
Brand Financial Training http://www.brandft.co.uk
Anyone sitting a written taxation/investment exam last year and faced with a holiday home question and tax calculation may have wondered quite how to answer it. At the time there was a query around whether BPR would be allowed and therefore exempt from IHT. The CII would have been aware of the case and would have had a marking scheme to take account of it.
Last week the wait was over and the Upper Tribunal turned over a ruling concerning a furnished holiday bungalow that had formerly been allowed relief from IHT by granting BPR.
This is going to affect those people who have holiday homes that they rent out – unless they (or their agent) provide ‘substantial’ services in which case they may still get the relief. Otherwise they are treated just like any other investment – just like an ordinary buy to let rental property in fact – so will form part of someone’s estate and potentially be liable to IHT at 40%.
The case in question was regarding a large bungalow being rented out for profit. The owners apparently offered cleaning, caretaking, gardening and a laundry service but the judge maintained that it would be subject to IHT leaving a big question mark over what ‘substantial’ services actually means.
According to Revenue figures, around 60,000 people are claiming furnished holiday let status. Some of them will still qualify but for those who are not providing much in the way of services will not.
So what do you think? Lots of us have I’m sure stayed in ‘furnished holiday lets’ – I can remember one in beautiful Cornwall where the service could only be described as diabolical!
As always I’d be interested to hear your thoughts.
Brand Financial Training