View more on these topics

INHERITANCE TAX PLANNING

Under section 105(3) of the Inheritance Tax Act 1984 (IHTA) business property relief (BPR) is denied to businesses whose business consists wholly or mainly of holding investments.



A recent case before the Special Commissioners highlights the need to look carefully at the operation of what appears to be a property holding business before dismissing the possibility of BPR.



In the case of Furness v IRC a partnership, two-thirds belonging to the father (now deceased) and one-third to the son, owned a caravan site. There were visiting touring caravans and static caravans. The partnership did not own any of the caravans, but the static caravan owners were obliged to either sell to or buy from the partnership. There were entertainment facilities, shop and clubhouse with a bar, operated by the son&#39s employees. It appears that during the holiday season the son would work up to ten hours a day, seven days a week running the business.



The Inland Revenue argued that the partnership was denied relief by s105(3) IHTA 1984. However, the Special Commissioners accepted the taxpayer&#39s claim to BPR for two reasons



1. The amount of work put in by the son and his full-time employees went beyond what would be expected in a business that consisted of holding investments.


2. The fact that the income received from trading in caravans exceeded the rental income received from letting caravan pitches.



It is curious that it was the son who did the work but the father&#39s estate that was claiming BPR. However, since the business in its entirety was deemed not to be an investment holding business all partners benefited.

Recommended

Tax block on pension rebate

The Inland Revenue may effectively be barring discount brokers from charging flat fees instead of commission for pension annuities.A report by The Sunday Times has found IFAs are being blocked from refunding one-off commission to pensioners when they buy an annuity.The Inland Revenue says the refunding of commission can jeopardise the tax breaks of the […]

NatWest swipe at BoS

NatWest has hit out at the Bank of Scotland claiming it is avoiding key questions over the Edinburgh-based bank&#39s £22bn hostile takeover bid.The beleaguered bank also says BoS&#39s proposals do not stand up to examination and are characterised by rhetoric rather than detail.

Life insurance regulation overbearing claim

Life insurance regulation has become overbearing and destructive in the UK, according to experts at an international industry conference.The levels of regulation and its effect on employment within the industry were highlighted at an international conference held in Chicago.International Membership Communications Committee of the Million Dollar Round Table UK chairman Terence O&#39Halloran says: &#34There has […]

FSA blocks building society windfall gains

The Financial Services Authority is to continue forcing building societies to keep a hefty sum of cash aside against lending.The FSA said reserves were currently “about right”, dashing building societies hopes that they would make windfall gains after changes to regulatory legislation.Building societies have long been penalised by being forced to set aside more money […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment