Business Property Relief Allowed for DIY Livery Business

Business Property Relief (BPR) reduces the value of a business or its assets for the purposes of calculating Inheritance Tax (IHT). You may be able to claim BPR at a rate of either 50 or 100% on certain business assets of an estate. However, according to s105(3) Inheritance Tax Act 1984, if the business is one of wholly or mainly dealing in securities, stocks or shares, land or buildings or in the making or holding of investments, this does not constitute relevant business property and therefore does not attract the benefit of BPR.

In the recent case of HMRC vs The Personal Representatives of the Estate of Maureen Vigne (Deceased) [2018] UKUT 0357 (TCC), the Upper Tribunal (UT) upheld the decision of the First-Tier Tribunal (FTT) that a livery stable business qualified for BPR as it did not consist wholly or mainly of making or holding investments.

Mrs Vigne inherited 30 acres of land from her husband in 2003, which had been used to run a DIY livery business called Gravelly Way Livery stables. The land was let to a tenant for some time until they returned the land in 2008 when the livery business started again. It made very modest profits from offering additional services such as: a worming service, the provision of hay feed, the removal of horse manure, and a daily check on each horse’s health. There was also a self-employed yard manager and the property had planning permission to be used as a livery business. Mrs Vigne died in 2012 and her personal representatives claimed BPR on the grounds that this asset constituted “relevant business property”.

HMRC refused the claim for BPR on the basis that a livery business would require land, which was considered as the holding of an investment and therefore the entire business should be characterised as a business of holding investments.

The FTT allowed Mrs Vigne’s personal representatives to claim BPR because it looked and felt like a business, rather than an investment, to anyone who was unaware of the distinction between property and other businesses for IHT purposes.

The UT dismissed HMRC’s appeal as it could only overturn the decision of the FTT if it was satisfied that the wrong legal test had been applied, or the correct legal test had been misapplied to the facts. The UT held that the FTT had applied the correct test by considering the business as a whole and the services it provided. There was also no clear bright line between those businesses which do, and do not, qualify for BPR.

This case highlights how HMRC treats businesses which may not clearly seem to be businesses for IHT purposes. The decision is often fact-specific and there seems to be a need for additional services over and above merely providing land or buildings, or fields and stables in this instance, to be classed as a business and therefore benefit from BPR.

To discuss any of the issues raised above, please contact a member of the Private Client team on 01384 410410.