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Business Property Relief and Holiday Parks

Posted on 08th July 2021 in Parks, Later Life Planning

Posted by

Gráinne Staunton

Partner and Solicitor
Business Property Relief and Holiday Parks

How does Business Property Relief affect holiday parks?

Two years ago this month, the Office of Tax Simplification published their second report into the reform of Inheritance Tax. Having gathered information from practitioners, government departments and the public, they sought to publish their findings about how the complex Inheritance Tax system could be reformed.

Amongst these recommendations came, halfway through the over-100 page document, a suggested reform to Business Property Relief, a relief from Inheritance Tax which is of potentially enormous value currently to business-owners, such as park-owners, and farmers.


What is the current situation with Business Property Relief?

As things stand, for Business Property Relief (‘BPR’) purposes, Inheritance Tax relief will only apply if a business is not deemed to consist “wholly or mainly of...making or holding investments”. This is known as the ‘trading versus investment’ test. Strange as it seems, the Revenue makes a very fine distinction between businesses using land:

  • On the one hand, a business managing a portfolio of tenanted properties would fall short of the test. Here, the Revenue argues that the business is holding the properties as a means of generating rental income and so class it as being carried out for investment purposes, so BPR is denied.
  • By contrast, if the same portfolio of properties were used by to provide bed and breakfast accommodation, the Revenue would usually class the business as a trading business and so permit Inheritance Tax relief. The justification for this is the additional level of service offered to the users of the bed and breakfast business; in the Revenue’s eyes, the fees are for more than simply staying the night.

The business is looked at by the Revenue in the round and they would consider the ‘trading’ or ‘investment’ nature of the enterprise’s income, profit, capital employed and employee time (among other things). If more than 50% of these are deemed to fall on the ‘trading’ side of the line, the business as a whole qualified for BPR in full – with a few exceptions.

Holiday and residential parks of course, by their very nature, can often fall on the borderline and this is where full, specialist advice is required.




How might Business Property Relief change?

Of course, for any lifetime gifts of business assets, the position is slightly different for Capital Gains Tax (‘CGT’) purposes. For the relevant reliefs, the test is not the ‘wholly or mainly’ BPR test, requiring 50%, but a higher threshold of 80%.

One of the suggestions raised by the OTS is that the BPR test is aligned with that for CGT purposes. This would of course mean that, on death, even fewer park businesses would be likely to qualify for the extremely valuable Business Property Relief.

We have been keeping our ear to the ground for you but, as yet, have not heard a suggestion that the proposals will be adopted – which is good news for those hoping to secure the relief. Successfully achieving BPR on a park business is always a fight with the Revenue but, for now at least, the goalposts are roughly where they ever were.

Of course, the government is looking for ways and means to cover the substantial bill caused by the pandemic and a number of options are being considered. Raising the bar on BPR could be one easy way to generate much-needed income, so we will – and you should – watch this space.


How can Tozers help?

Whether you are conducting some lifetime succession planning or dealing with a loved one’s estate, there is no substitution for seeking full, professional advice. We at Tozers have a very successful track record in helping our clients to best-present their case to the Revenue to secure BPR. If you would like any help or advice, please contact our specialist solicitors today.

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