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Inheritance tax relief on holiday lets

Inheritance tax can be reduced on a business or its assets by claiming business relief, but this is only available where an asset held by an individual is classed as a business asset. Its important to note that investments in land, where property is rented out don’t generally qualify for business property relief.

However, a case heard this month has suggested that those owning holiday lets may, in some circumstances, be able to claim extra relief from inheritance tax.

Mrs Graham died in 2012 and at the time of her death owned Carnwethers, an old farmhouse on the Isles of Scilly. The property was Mrs Graham’s home but also contained a number of self- catering holiday lets.

Mrs Graham’s executors successfully argued that the provision of services by Mrs Graham and her family meant that they were a trading business and therefore inheritance tax should not be payable on the value of the property. The services provided included tea, biscuits and sometimes cake on arrival, help and advice for guests about the local area, help with organising events and the provision of home-made marmalade.

It was concluded that the business was not one that consisted wholly or mainly of holding investments and therefore was not chargeable to inheritance tax.

Each case will depend on its facts and it is essential to get expert advice to ensure the maximum value from your estate passes to your intended beneficiaries. Whilst the provision of home- made marmalade might be taken into account, it is unlikely the only point on which the case is decided and all the elements of a business need to be considered.

If you would like advice relating to holiday lets and inheritance tax, please contact our experts now.