In John Best (executor of the estate of Alfred William Buller deceased) v HMRC [2014] TC 03217 shares in a company which ran a business centre did not qualify for inheritance tax (IHT) business property relief (BPR).

BPR provides relief from inheritance tax on the transfer of “relevant business property” this excludes an interest in a business or shares in a company which is engaged wholly or mainly in dealing in securities, stocks or shares, land or buildings or in the making or holding of investments. See business property relief (BPR) 

The facts

  • The Company owned an eight acre site consisting of land and buildings, which were let for long or short term office and light industrial use by small-to-medium sized businesses. • (the Business Centre).
  • The site included car parking space available to occupiers, their employees and customers, together with a reception area with a receptionist employed by the Company.
  • Occupiers had 24-hour access to the site and the Company provided site security including a manned security barrier.
  • Letting licensees did not grant exclusive possession of a unit, but the units were lockable and the licensees had their own keys, with the Company retaining a master key.
  • Monthly licence fees were calculated on a weekly basis, and an apportioned service charge was also payable monthly.
  • The deceased spent a lot of his time at the Business Centre dealing with the everyday matters that arose with the occupiers. On his death the Company employed a full time replacement as a “site administrator”.
  • The Company also employed a site maintenance person, a forklift truck driver and a full time receptionist providing secretarial and other support services with another person doing the same job part time. There were also three security guards.
  • The layout and physical limitations of the Business Centre meant that many of the industrial units were accessible only by small vans and they used the forklift truck service provided by the Company to move deliveries to the unit.

The unquoted shares in the Company formed part of the estate of the deceased and the executors claimed BPR, which was denied by HMRC.

The decision

The FTT decided that the business of the Company consisted wholly or mainly of holding investments (sections 104 and 105, IHTA 1984) and so refused BPR. It relied on past case law: • In looking at the business in the round (both qualitatively and quantitatively) the relative contribution to income or profits is “relevant but not determinative” of the issue. • The real nature of the business was an investment business exploiting the land by granting tenancies and licences. • The income from the additional services of the forklift truck service and the provision of office type facilities was very small compared to the licence fee income and they did not predominate when considering the activities of the Company as a whole. Link: