The First-tier Tribunal (FTT) has decided that another furnished holiday letting business didn’t qualify for business property relief (BPR). What could have been done to prevent a large inheritance tax (IHT) bill?

Case facts

In Executors of the late Sheriff Graham Loudon Cox v HMRC, Sheriff (S) ran a furnished holiday letting (FHL) business for 25 years, right up until his death. The holiday lettings comprised three flats in a converted manor house and S occupied a fourth flat as his main residence. There is no doubt that S worked hard to ensure his guests enjoyed their stay and he took great pride in maintaining the grounds of the property. The IHT at stake was almost £225,000.


It’s difficult for an FHL business to qualify for BPR on death unless significant services are provided for guests. S was said to have gone above and beyond for his guests by picking them up from the train station, recommending restaurants, providing books and games, babysitting, taking care of their dogs and providing racquets and beach balls to use on site.


The FTT dismissed the appeal because the letting business was mainly holding investments and the services provided were not rendered to guests with any regularity. The FTT looked at the testimonies of previous guests and the business’s website to determine these facts.

Tip. Ensure clients with FHL businesses advertise any additional services on promotional material to show that they are not ad hoc.

How to help clients with FHL businesses?

Fortunately, FHLs do qualify as business assets for business asset disposal relief, which reduces the rate of capital gains tax to 10%. Clients can attempt to mitigate an IHT bill on FHLs by either selling the business and reinvesting the cash in BPR assets or gifting the business to the beneficiaries of their estate during their lifetime. Whilst it won’t appeal to all clients it’s worth considering for larger estates to save up to 30% in capital taxes which can be passed on to the next generation instead.

The full transcript can be found here.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit or call 01233 653500.