Eva Mary Butler & Ors v The Commissioners for HMRC
[2023] UKFTT 872 (TC)
The Executors of Keith Denis Lewis Beresford (Deceased) v The Commissioners for HMRC
24 October 2024
[2024] UKFTT 952 (TC)
First-tier Tribunal
A company rented out office space, offering some extra services like cleaning and internet. The tax office said this wasn't a 'business' for tax breaks, just investing in property. The court agreed, saying the main thing was renting space, not the extra services.
Key Facts
- •Appeal against HMRC's determination denying Business Property Relief (BPR) for Inheritance Tax (IHT) on shares in Fiveteam Limited, a holding company for Ninecourt Limited.
- •Ninecourt's main asset was 16 High Holborn, a building with serviced offices and commercially rented space.
- •Serviced offices operated under a 'Serviced Office Management Agreement' (OMA) with Orega, with a revenue-sharing model.
- •The dispute centered on whether Ninecourt's business consisted wholly or mainly of making or holding investments, thus disqualifying it for BPR.
- •The Tribunal considered the nature of income streams from facility fees (serviced offices) and contract fees (additional services), along with rental income from commercially let floors.
Legal Principles
Business Property Relief (BPR) is available if the value transferred is attributable to relevant business property; however, it is not available if the business consists wholly or mainly of dealing in securities, stocks or shares, land or buildings, or making or holding investments.
Inheritance Tax Act 1984 (IHTA 1984), sections 104(1), 105(3)
The 'making or holding of investments' is not statutorily defined; cases turn on their facts.
Case law, including George v HMRC [2003] EWCA Civ 1763, Vigne [2018] UKUT 357 (TCC), Pawson [2013] UT 050 (TCC)
Active management of an investment does not automatically disqualify it from being an investment business; the nature, not the level, of activities is key.
George v HMRC [2003] EWCA Civ 1763, Vigne [2018] UKUT 357 (TCC), Pawson [2013] UT 050 (TCC)
The question of whether an activity is trading is a matter of degree, frequency, organisation, and intention.
Ransom v Higgs [1974] 1 WLR 1594
Outcomes
Appeal dismissed.
The Tribunal found that Ninecourt's business, considering the facility fees as the primary income stream, consisted wholly or mainly of making or holding investments. While additional services were provided, these were deemed ancillary to the core business of licensing space.