Balfour Business Property Relief tax decision good news for traditional estates, says Knight Frank
Date : 19 August 2010
Knight Frank’s rural property teams have welcomed this week’s decision (17 August) by Scotland’s Upper Tax Tribunal to reject an appeal from HM Revenue & Customs that could have had serious implications for traditional estate owners if upheld.
The case revolved around the decision in 2008 by HMRC to deny Business Property Relief (BPR) on the Whittinghame estate of the late Lord Balfour. Inheritance tax is not payable on business assets that qualify for BPR.
The HMRC claimed one of the reasons BPR should not be available was because the letting income derived from land and properties on the estate meant its business consisted of “wholly or mainly of the holding or making of investments”. Investment activities, including the letting of property, do not qualify for BPR.
HMRC’s original decision was overturned last year by a First Tier Tax tribunal that said the lettings activity on the estate was ancillary to the main business of the estate, which was farming. HMRC, however, appealed. It is this appeal that has just been turned down.
If HMRC had been successful, it could have landed many traditional rural estates with huge inheritance tax bills on the death of the owner. Such estates often combine farming and letting activities, which, until Balfour, had generally been viewed in the round by HMRC.
Tom Barrow, Knight Frank’s head of rural valuations, said the tribunal’s decision was extremely good news. “It removes a great deal of uncertainty for traditional estate owners who would have been extremely concerned about the implications of a successful appeal by HMRC, which could have been very detrimental.”
Barrow added: “We do not yet know if HMRC will appeal this latest tribunal verdict and traditional estates should plan carefully to ensure the benefits of any property reliefs and inheritance tax planning measures are maximised."
For more information on the implications of the Balfour case please contact Tom Barrow at tom.barrow@knightfrank.com or on 0117 945 2641
For more information on strategic estate planning and Knight Frank’s other rural property services please go to www.knightfrank.co.uk/rural