In Dimitrakis G Demetriou & Anor v HMRC [2024] TC09288, the First Tier Tribunal (FTT) found that a wild fishery business did not qualify for Inheritance Tax (IHT) Business Property Relief (BPR). The business consisted mainly of holding investments.
For the seventeen years prior to her death in August 2020, Mrs Pearce carried on a sole trader business known as Kingsworthy Meadow Fisheries.
- This business was carried out at Fulling Mill, which was part-owned by Mrs Pearce and part-owned by a will trust established by her late husband. Mrs Pearce had a Life interest will trust.
- Clients paid rod fees in return for permission to come on the land at Fulling Mill to fish from the allocated part of the riverbank.
- During the time that Mrs Pearce ran the business, the Environment Agency began to discourage stocking fisheries and refused to renew fish stocking licences. The business changed from being a stocked fishery to the management and maintenance of a wild fishery.
- This caused income to decline as fishing became more difficult.
- The net profits in the years leading up to Mrs Pearce’s death were: in 2017 £3,988, 2018 £2,280, 2019 (£2,419) and 2020 £6,184.
- The Inheritance Tax (IHT) return submitted by Mrs Pearce’s executors claimed Business Property Relief (BPR) on 2/7ths of her residence (office, reception room, storage areas) and 17 acres of river and surrounding land.
- The trust claimed BPR on 9.6 acres of river and land.
- Following enquiries into both returns, HMRC denied BPR on the basis that the business was one mainly of holding investments.
- The executors and trustee Appealed to the First Tier Tribunal (FTT).
The FTT started from the position that the owning and holding of land in order to obtain an income from it is generally an investment activity.
The tribunal then turned to consider the nature of the activities carried on, not the level of those activities. The FTT noted that very active management of an investment does not prevent the business from being an investment business.
The FTT found that:
- Holding the land to generate rod fees was, on the face of it, an investment activity.
- Investment activities included taking bookings, vetting the suitability of clients, allocating beats to clients, providing car parking.
- The fishermen’s huts, outbuildings for storage and toilets were also part of the investment activities.
- Time spent mowing riverbanks, clearing vegetation, cutting weeds, clearing river obstructions, protecting riverbanks from erosion and managing the vegetation and river environment to promote the health of the fish and encourage the supply of flies were activities to maintain and enhance the investment.
- Conservation activities were part of the maintenance and enhancement activities of the investment business.
- Non-investment activities included hospitality (morning coffee and wine or lemonade after the day’s fishing), the provision of first aid, lending kit to clients and the help and advice given to the fishermen.
- The business was conducted more for love than money. Mrs Pearce and other members of the family had a passion for fishing and conservation. Many of the clients had become their friends.
- The non-investment activities were not of sufficient significance to tip the balance of the business overall from an Investment business to a non-investment business.
- In the round, the business was mainly a business of holding investments.
The appeal was dismissed.
The FTT noted that had the business provided services such as tuition in fishing, ghillies to guide the rods, if it had sold or hired equipment or provided catering or a bar the outcome might have been different.
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