Taxman loses IHT property battle rematch

The taxman has lost a protracted inheritance tax (IHT) test case that confirms estates letting land and residential property to third parties qualify for business property relief.

The ruling is key to property owners and estate planners as the ruling means these properties are exempt from IHT.

The case concerning the estate of the Late Lord Balfour was first heard by a tax tribunal in 2009. Then, Lord Balfour’s executors were granted permission to appeal a determination by HM Revenue and Customs (HMRC) that disallowed property let by the estate from IHT.

One of the main factors of the case was whether a traditional landed estate carrying on a variety of activities qualified for business property relief as a trading entity.

In general, tax rules consider letting land and residential property as an investment rather than a business, which puts them squarely in assets charged to IHT.

HMRC lost the case and appealed the result. The judgment was handed down today.

The Upper Tribunal disallowed the appeal, letting the previous verdict in favour of Lord Balfour’s executors stand.

HMRC has reserved the right to take the matter to a higher court after reviewing the result.

Until HMRC announce their intentions, estate planners and solicitors are still in doubt over whether landed estates qualify for IHT exemption even though HMRC has lost the argument twice in court.

Note from The Money Centre

The Money Centre’s Platinum Estate Planning package is an absolute ‘must have’ for all portfolio landlords. For further information please click here.