In The Executors of Keith Denis Lewis Beresford vs HMRC [2024] TC09333, the First Tier Tribunal (FTT) found that shares in a holding company did not qualify as ‘relevant business property’ for IHT purposes. Its subsidiary was not undertaking a qualifying business activity for IHT.
The executors made a claim for Business Property Relief (BPR) on shares held in Fiveteam Ltd, a holding company, under s.105 Inheritance Tax Act 1984 which outlines the provisions for a transfer of value for IHT purposes to qualify as a relevant business property.
HMRC raised a determination to disallow BPR to be claimed by the holding company as the business consists wholly or mainly of making or holding investments.
The company appealed to the First Tier Tribunal (FTT) which found:
- Fiveteam Ltd's assets consisted solely of shares in ‘Ninecourt Ltd’.
- The main asset in Ninecourt Ltd was a six-floor freehold property purchased in 2008.
- Four of the floors provided serviced office space to tenants for a 'facility fee'.
- Ninecourt Ltd appointed ‘Orega’ to manage the office space and provide additional services to the tenants.
Both parties agreed that BPR cases must be judged on their facts and should start only from the ‘language of the statute’.
The executors argued that:
- Ninecourt Ltd’s business was largely a trading business with four floors being let to serviced office tenants and two floors being let on a commercial basis.
- Licenses were granted to rent out the office space and additional services were provided to the tenants such as IT, postage services, telecoms services and catering which constitutes a trading activity.
- A facility fee (or license fee) was paid by the end clients for the additional services as opposed to a standard rent being charged.
- The facility fee accounted for a significant proportion of the company’s income.
- There should be no presumption that a business that consists of the exploitation of land is automatically an investment business.
HMRC argued that:
- The company made a profit from the exploitation of land which is largely considered ‘the making or holding of investments’.
- Although they acknowledged other services were being offered, these were minimum requirements.
- The fundamental business was to generate income by licensing space.
The FTT compared the costs of the services to the income generated from the facility fee and determined these to be relatively minor costs.
The FTT considered that the services provided by Ninecourt Ltd fall on the ‘managing investments’ side of the argument.
Additionally, the FTT acknowledged that services were provided but the frequency of these were not enough to constitute a trade. Fundamentally the business is one of providing a physical space in a building.
The FTT decided that Ninecourt Ltd was generating income from 'making or holding investments' and it followed that Fiveteam Ltd as the holding company was also making or holding investments, therefore the relevant property provisions were not met.
The appeal was dismissed.
Useful guides on this topic
IHT Business Property Relief
A guide explaining what business property relief is, when it can apply and pitfalls and planning points.
IHT Business Property Relief: holding companies
Does a holding company qualify for business property relief (BPR)?
IHT Business Property Relief: estate planning
How can you use business property relief (BPR) to its maximum advantage through the interaction with other inheritance tax reliefs?
External guides
The Executors of Keith Dennis Lewis Beresford vs HMRC [2024] TC09333
