Tanner, Executors for the Estate 0f v Revenue and Customs [2025] UKFTT 328 (TC) (12 March 2025)

DECISION

Introduction

1. This appeal is against a Notice of Determination issued on 4 November 2020 under s221 Inheritance Tax Act (IHTA) 1984, in which HMRC determined that no part of a specific asset within the relevant estate was relevant business property as defined in s105 IHTA 1084. The effect of the determination was that the claim to business property relief was denied and the inheritance tax due on the estate was held to be £1,168,801 (subject to valuation). The relevant asset was the deceased's interest in a business providing holiday accommodation.

2. The dispute between the parties was whether or not the business consisted wholly or mainly of making or holding investments.

Proposed expert witness evidence

3. At the start of the hearing, the panel considered whether to admit the evidence of an individual who had been put forward as an expert witness. HMRC contended that the individual's witness statement did not comply with the requirements for expert evidence, as it contained a significant number of assertions without sources. The statement appeared to be advocating on behalf of the appellant as part of the work of a lobbying group with which the individual was connected.

4. The appellants contended that that the objection had been raised very late; the individual's witness statement had been provided over a year earlier and HMRC had raised no objection until their skeleton argument was filed. They contended that the individual should be regarded as a witness of fact as he had looked at the business. They also produced a supplementary statement where the individual stated that he understood his primary duty to be to the Tribunal and stated that government had relied on him as an industry expert and so that he should be regarded as independent.

5. The panel considered the parties' arguments and concluded that the witness statements would be admitted in evidence apart from a number of identified paragraphs where the individual expressed an opinion on tax law. The panel would then consider what weight should be given to the individual's evidence in the context of other evidence provided.

6. The individual's evidence was (in very short summary) that he considered that the appellant business was a professionally run exceptional business which merited business property relief. His evidence also included comparisons of the business to his view of the market. After hearing all of the evidence and submissions, it appears to us that this was connected to the judge's comment in the decision in Graham [2018] UKFTT 306 (TC) that "it will only be the exceptional letting business which falls on the non-investment side of the line" (at [92]). However, in context we consider that it is clear that the judge in that decision meant that it will be exceptional for a letting business to fall on the non-investment side of the line, rather than that a letting business which is exceptional will always fall on that side of the line. Further, the question before us was not one to be determined by the way in which the appellant business compared to the rest of the market and, in particular, whether it was 'professionally run', but rather by the specific characteristics of the business.

7. To the extent that his evidence related to his views about the appellant business, we do not consider that it assists us. Although the individual had looked at the business he was not involved with it and had viewed it in order to provide his evidence. The panel also had the benefit of a site visit and was able to form its own views as to the business: this is not an area where particular specialist expertise and experience is required to understand the evidence given by those involved in the business.

8. For the reasons above, we have concluded that his evidence was not of any particular assistance to us and that we need give no weight to the individual's evidence and so we have not set it out further in this decision (or, indeed, identified the individual). This should not be taken as a criticism of the evidence, but rather than it did not add anything useful for us given the question before us, the evidence of the parties and the site visit undertaken at the start of the hearing.

Relevant law

9. The relevant law is contained in ss104 and 105 IHTA 1984:

s104

(1) Where the whole or part of the value transferred by a transfer of value is attributable to the value of any relevant business property, the whole or that part of the value transferred shall be treated as reduced—

(a) in the case of property falling within section 105(1)(a) or (b) or (bb) below by 100 per cent;

...

For the purposes of this section, the value transferred by a transfer of value shall be calculated as a value on which no tax is chargeable.

...

s105

(1) Subject to the following provisions of this section and to sections 106, 108, 112(3) and 113 below, in this Chapter "relevant business property" means, in relation to any transfer of value,—

(a) property consisting of a business or interest in a business;

...

(3) A business or interest in a business, or shares in or securities of a company, are not relevant business property if the business or, as the case may be, the business carried on by the company consists wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings or making or holding investments.

10. The effect of these provisions is that where the value transferred on a transfer of value is attributable to property consisting of a business or an interest in a business there will be 100% tax relief on that property unless the business consists "wholly or mainly" of "making or holding investments".

11. What amounts to a business of "making or holding investments" is not set out in statute; Henderson J (as he then was) set out a summary of relevant case law and concluded that the starting point when considering whether or not a business such as this qualifies for relief is "that the owning and holding of land in order to obtain an income from it is generally to be characterised as an investment activity ... such an investment could be actively managed without losing its essential character as an investment" (Pawson [2013] UKUT 50 (TCC) at [42]). His approach was subsequently endorsed by the Court of Appeal ([2013] EWCA Civ 1864).

Background

12. The deceased (Ms Tanner) died on 17 September 2017. Her estate included the asset to which this appeal relates. That asset is a holiday accommodation business. The panel and parties viewed the site as part of the hearing; we noted that a number of years had passed since Ms Tanner's death and the relevant point in time that we are to consider in determining the nature of the asset is the date of Ms Tanner's death.

13. At the time of Ms Tanner's death, there were five active self-catering holiday letting units in Sandsend, near Whitby:

(1) The Knoll: semi-detached. three bedrooms, valued at £450,000

(2) The Nook: semi-detached, three bedrooms, valued at £450,000

(3) Seaview: semi-detached, three bedrooms, valued at £425,000 (the other half of this property is not owned by the estate)

(4) Egton Bell: detached, one bedroom, valued at £290,000

(5) Meadowgates: detached, three bedrooms, valued at £425,000. This unit has had the attached garage partially converted to a games room.

14. The properties were available for up to three weeks at a time. In the high season, the properties could only be booked in weekly blocks. At other times, the properties could be booked for less than a week. Changeover days were principally on Mondays and Fridays.

15. At Ms Tanner's death, she also owned The Railway Cottage, a two bedroom house nearby, which was uninhabitable at that time and valued at £230,000. Planning permission had been obtained for this property and some internal demolition work had begun on the property in order to turn it into accommodation.

16. Ms Tanner's estate also included Wood Lea, where Ms Tanner lived, and a property which was Ms Foster's residence. These houses were adjacent to the holiday accommodation. Wood Lea included an annex which contained a reception area, office and garage used in the business. The outer door to the office states that the opening hours are 9am to 3:30pm and that the office is closed for lunch and on weekends and bank holidays. Although Ms Foster stated that they were more usually open 9am to 5pm, she accepted that a customer would take the sign at face value unless advised otherwise.

17. The units were available for letting for most of the year. This was generally on a weekly basis (Friday to Friday) but short breaks of two or three nights could also be booked outside high season (late to July to the end of August). The cost of bookings included the use of the accommodation, gas and electricity, bed linen and towels. For Egton Bell, the price also included the use of bathrobes and slippers. The units were generally not available for a four week period early in the year to allow time for maintenance.

18. The properties are generally clustered along a private cul-de-sac; Railway Cottage is slightly separated. The road is not exclusively for the use of the business as it also provides access to the back of adjacent properties which do not form part of the business. The units are relatively close to the sea, although with no significant sea view as there are properties on Sandsend Road and the A174 which are between the properties and the seafront. We also noted that the village of Sandsend is largely spread out along the seafront.

19. The business engaged a number of staff at the relevant date: a full-time manager and up to eight part time employees. Ms Tanner had been involved in the business but, having had a stroke in 2015, was no longer actively involved by the time of her death in 2017.

20. The full-time manager was Ms Foster. She became involved with the business initially as a tax adviser in private practice to the executors of Ms Tanner's partner. In 1997 she left practice and became employed full-time by Ms Tanner. She worked closely with Ms Tanner and was named as the beneficiary of Ms Tanner's residuary estate. She was also the beneficiary of a discretionary trust established by Ms Tanner in 1990.

21. The business has a website which is principally used as an availability calendar for potential customers to determine whether or not a unit is available for letting. Customers cannot book online; bookings are taken over the telephone or in person. The business does not use third party agents and does not incur large sums on advertising.

Relevant facts

22. In addition to the papers in the bundle and the site visit, we had oral evidence from Ms Foster and Ms Gaines. We found both to be helpful witnesses. We also had witness statements from Mr Knapper, a customer of the business, and Mr Jackson, who worked for the business. Neither of these were present at the hearing nor was their evidence challenged in their absence. We considered their witness statement and concluded that Mr Jackson's evidence did not add anything to that provided by Ms Foster and Ms Gaines and so we have not referred to it further. Mr Knapper's evidence is considered below.

The nature of the accommodation

23. We had the benefit of a site visit on the first day of the hearing in order to view the property, noting of course that a number of years have passed since the relevant date which we are required to consider. The site was closed to visitors as part of an annual closure for redecoration and maintenance.

24. It was not disputed that the accommodation was furnished and decorated to a high standard. The appellants referred to the accommodation being furnished to five-star standard based on Visit England's rating standards. They did not apply for official gradings or awards as they considered that these were a tick-box exercise and did not make a difference to an established business with a regular customer base.

25. We find that the properties are, and were at the relevant date, comfortably furnished and well-maintained. The properties had full kitchen facilities, laundry facilities, heating and similar. They were provided with telephones that could receive incoming calls and make 999 calls in an emergency. There were also a small number of books and DVDs provided for visitors. One property (Meadowgates) had had its garage partially converted into a games room.

26. The grounds surrounding each of the properties were similarly tidy and well-maintained. Ms Foster accepted in evidence that the gardens were of an adequate size for the properties rather than 'palatial'.

27. Although there were some submissions and contentions that the properties and grounds had significant "wow factor" we concluded that they were pleasant and well-kept but that they were not particularly exceptional, meeting the business' intention to maintain a five-star standard.

28. One of the properties, Egton Bell, included some memorabilia relating to the shipping business history family of Ms Tanner's partner, including the bell of the last ship built by the business. Other memorabilia is displayed in the reception office.

29. The field adjacent to the properties is agricultural, grazed by cattle in the summer.

Activities undertaken

30. The following has been established from the site visit, the evidence of the witnesses and information in the bundle provided to the panel.

Housekeeping and similar

31. The business undertook housekeeping and cleaning services. These were activities primarily undertaken on the 'changeover' days when customers leave in the morning and new customers arrive in the afternoon. There was approximately a six-hour window between customers leaving and arriving on a changeover day.

32. In addition to cleaning and tidying, before customers arrived, staff would turn on lamps, adjust heating and light fires. The radio would be set to play Classic FM.

33. Where customers were staying more than a week, the house would be cleaned on the seventh day of their stay. The business provided additional cleaning services at an extra charge where customers requested this.

34. Linen and towels were provided in each property. These are refreshed once a week for customers staying more than one week.

35. Robes and slippers were also provided in one property, Egton Bell.

Property maintenance and gardening

36. The properties are carefully maintained, with substantial maintenance and redecoration on a regular basis when the business is closed for a few weeks early each year. The gardens are well-kept.

Welcome basket

37. Each property is provided with teas, coffee, milk and sugar, eggs, the local newspaper, a weekly weather forecast and tide timetable. Homemade scones with jam and butter were also provided at the relevant date.

Information

38. Essential tourism information would be provided verbally, and tourist information brochures and leaflets were provided. The pack included information about local amenities, walks and transport facilities. Manuals for equipment in the house was also provided. Advice was given as to what to do in an emergency.

Out of hours services

39. Ms Foster's evidence was that she, her husband and Ms Tanner were available to guests during their stay outside office hours as they lived on site. She stated that the most common requests out of hours were for assistance with technology, such as wif-fi, television, equipment breakdown or window ventilation and the house telephone.

40. Other issues dealt with were problems with the utilities supplies such as power cuts or similar; in these cases, they would call the emergency services to report the fault and ask when it would be reconnected. Where the problem persisted, the business would supply food and drink and transfer customers to another unit if there was one available.

41. They had also dealt with medical emergencies when a customer had fallen or required ambulance services.

42. The documentary evidence in the bundle indicated that customers were not always able to contact staff out of hours; the out of hours telephone number was stated to ring through Ms Foster and Ms Tanner's houses but that the business did not have a mobile phone before 2017. She stated that there was poor mobile coverage in the area, although we consider that the point of a mobile phone would be to be available when away from the site given that the site itself is not particularly extensive.

43. Ms Foster's evidence was also that they did not work at weekends and that there would not always be a member of staff on site out of hours although Ms Tanner or her carers might be available to answer. We conclude from this that when the onsite staff (Ms Foster and her husband) were away from the site out of hours there was no-one on call to cover their absence. There was evidence in the bundle that a customer had had some difficulty contacting staff when equipment failed in their property, although staff had subsequently made efforts to minimise the impact on the customer.

Hospitality

44. This was the focus of much of the evidence, as the appellants contended that their provision of hospitality facilities was the key factor that meant that the business was not mainly one of holding investments.

45. When asked for details of the facilities being referred to, Ms Foster responded that it was people and recognition, that it was important that people recognised who they were speaking to and she considered that customers would put recognition ahead of the quality of the accommodation if they were happy with the recognition received.

46. Ms Foster stated that she had stayed in many first class hotels and had tried to provide similar facilities at Sandsend. She explained that this meant that they endeavoured to provide 'assimilate their guests into their holiday environment' by 'being kind, hospitable, naturally friendly and welcoming' to their customers.

47. Guests were welcomed by staff and given their keys so that they can go to their accommodation. Staff would later go to the accommodation to introduce them to the property, being shown how to the use the equipment and facilities. Time would be spent with regular guests catching up on their news, local gossip and advising them on anything new in the accommodation and the area.

48. Guests were encouraged to use the reception during office hours for information, help or advice throughout their stay and were advised to call at the Lighthouse if they required out of hours help.

49. Although Ms Foster stated in her witness statement that the business offered services such as private butlers, business offices and chauffeurs, we considered that this was an optimistic description which was not particularly supported by oral evidence or the documentary evidence.

50. Ms Foster acknowledged that the business did not offer private butlers but that the office staff could provide a similar function, booking tickets and making arrangements for customers. She agreed that this service was not advertised but did not consider that it needed to be advertised, as customers knew what services were provided. In the course of evidence, it became clear that customers might realise that they could ask staff for assistance but we do not agree that customers would necessarily know what staff might be able to assist with.

51. With regard to 'chauffeurs', she explained that this was also not advertised but that staff had on occasion transported guests to and from public transport links. Staff had also occasionally taken guests to the local minor injuries unit.

52. With regard to 'business services' this appeared to be the provision of wi-fi in the properties for the use of customers and occasional printing or photocopying in the site office.

53. Ms Foster stated that many guests had health issues and that they booked stays at the properties because they knew that staff were available to assist if there was a problem. They had also assisted customers by booking mobility scooters for them and providing aids for bathing. They had provided a wheelchair for one customer who had become incapacitated whilst on holiday. Where another customer had injured himself and could not drive, staff had driven the customer's wife for shopping and medical supplies and had also driven their car home at the end of the holiday. Where customers had forgotten medication, they had emailed their doctor to request a repeat prescription locally.

54. Ms Foster described these activities as something "provided as a human being that has compassion and looks after its guests". We note that none of the properties at the relevant date were adapted for use by customers with disabilities.

55. Although Ms Foster stated that they provided dog sitting, her evidence in the hearing was that they had kept an eye on a customer's dog which had been left in the property whilst the customer went out.

56. Staff had very occasionally agreed to babysit for customers, but this had been a private arrangement between the customer and the individual staff member. The business had not been involved, and could not offer the service, given the significant compliance and control requirements involved in such activities.

57. Ms Foster allowed other businesses to put leaflets in the accommodation unit to advertise their services (such as housekeeper employees who also had their own beautician businesses). These were not services provided by the business itself.

58. In summary, we find that Ms Foster's evidence was that staff helped customers when they asked for help and that she considered that this was something which was not offered by other holiday accommodation providers.

59. Ms Foster said that these services were never provided as a selling point; staff were human beings with compassion who looked after their guests. They were not there to provide all the services on an everyday basis, as "it doesn't work like that".

Time and costs involved

60. A number of submissions related to the time and costs involved in various activities. We considered the submissions and the analysis provided but have not referred to these submissions further in this decision because we did not consider that the numbers were particularly helpful. Although it was submitted for the appellant that these indicated that 86% of time involved was on non-investment activities, we considered that an analysis in the light of our findings indicated that a substantial majority of the time involved in the business was spent on investment and ancillary activities. There was, inevitably, a significant amount of time involved in particular in housekeeping and similar activities which we consider are ancillary or incidental to the investment nature of the business. We note also that the Upper Tribunal in Pawson (at [48]) stated clearly that the test that we are to apply is not as to the degree or level of activity but, rather, the nature of that activity.

61. The Court of Appeal confirmed that conclusion. The Court of Appeal (at [9]) stated that the intensity of an activity is neutral where the activity is characteristic of a business which includes the provision of furnished holiday accommodation. It is (as stated at [11]) the provision of other services which is important in determining whether the business is mainly one of holding investments.

Price charged

62. The appellants' evidence was that they charged prices which reflected those charged generally in the Sandsend area. They had to set prices comparably and could not set them higher or lower than others in the area as that would be bad for business. Although Ms Foster considered that the business provided services which competitors did not, she considered that practicalities meant that they could not charge more than the market rate.

Submissions

63. HMRC submitted, in summary, that the business provided customers with furnished holiday accommodation and that this was an investment activity. To the extent that services were included within the fee charged by the business to customers, these were ancillary or incidental to the investment activity.

64. For the appellants, it was contended that the services provided beyond accommodation meant that this should be regarded as not being mainly the holding of investments.

65. It was also contended that we should take a purposive approach to the legislation and that the denial of relief would be contrary to the acknowledge purpose of the relief, which was said to be aimed at businesses with little or no element of trading. This was, it was contended, also departing from long-standing HMRC policy and that denial of relief is significant 'over-reach' when compared with its sister relief, agricultural property relief.

66. We are, however, in a legal environment in which the Court of Appeal has approved the decision of the Upper Tribunal in Pawson that "the owning and holding of land in order to obtain an income from it is generally to be characterised as an investment activity. Further, it is clear from the authorities that such an investment may be actively managed without losing its essential character as an investment" (at [42]) and that "in any normal case an actively managed property letting business will [not qualify for relief] because the 'mainly' condition will still be satisfied" (at [45]). We note that the 'actively managed property letting business' in Pawson was furnished holiday accommodation, not residential accommodation.

67. For the appellants it was contended that, since Pawson, business property relief has become dysfunctional. If so, any such dysfunction is for the higher courts to deal with. We are bound by the decision of the Upper Tribunal, particularly given the approval of the Court of Appeal to the approach set out there. We would note that the decision of the Upper Tribunal in Pawson is now over a decade old; if Parliament was dissatisfied with the approach taken, there has been ample time for the law to be changed.

68. Accordingly, we have approached the decision in this appeal in line with the legislation, the case law that is binding on us, and in the context of the evidence before us. This is not agricultural property and the history of HMRC policy is not a factor that we can give any weight to, particularly in light of the case law.

Discussion

69. We note the statement of Henderson J in Pawson (at [42]) that, having reviewed the case law, the starting principle is "the proposition that the owning and holding of land in order to obtain an income from it is generally to be characterised as an investment activity ... such an investment could be actively managed without losing its essential character as an investment." In refusing permission to appeal, the Court of Appeal agreed with Henderson J's analysis.

70. We also note that the relevant date to be considered is the date on which Ms Tanner died, 17 September 2017. The burden of proof was agreed to be on the appellant.

71. There were submissions as to the quality of HMRC's decision making but we note that this is a matter in which we have full appellate jurisdiction. The question is not whether HMRC exercised best judgement, or similar, but whether or not this business is mainly one of holding investments.

Comparisons to rental property businesses

72. There was some discussion as to the rent that might be achieved if the properties were let as shorthold or similar residential accommodation. We did not consider such submissions to be particularly useful. This is not residential property, it is furnished holiday accommodation. These are different markets with different characteristics and we were not persuaded that any useful inferences could be drawn from a comparison.

Consideration of all of the issues

Quality of the accommodation

73. The appellants contended that the units were of exceptional quality and of a higher standard than most others in the self-catering holiday market both locally and nationally.

74. HMRC contended that this was a self-assessment, as the accommodation was not officially graded or rated, and that the standard to which property was furnished could not change the nature of the activity being carried on by the business. HMRC also contended that the furnishings were entirely typical of this type of investment business.

75. On balance, we do not consider that the quality of the accommodation fit-out and furnishings provided assists our decision to any particular extent. It was pointed out that the business incurred substantial expenditure on fixtures and fittings but, as already noted above, it is the nature of an activity rather than the intensity (in time or funds committed) that is important. We note the shipping memorabilia in the reception and in the Egton Bell unit but considered that, whilst of interest, it did not make any material difference.

76. We find that the quality of the accommodation in this case was relatively typical of the five-star sector of the furnished holiday letting market in which the appellants chose to operate. It is not a distinctive feature beyond that. We therefore conclude that the activities involved in the furnishing and fit-out (and similar) are ancillary or incidental to the business. We consider that it is at best a neutral factor in considering whether the business is mainly one of making investments noting, as set out below, that the case law references to exceptional mean that such businesses are rare rather than that they are of high quality .

Housekeeping, cleaning, laundry, maintenance and gardening, information packs, welcome basket, books, DVDs

77. It was generally agreed that these are non-investment activities. However, as noted by the appellants in their skeleton argument and in Ms Foster's evidence, this is work (and involves expenditure on staff, equipment and furnishings) which is embedded in any furnished holiday letting business and, as the properties were "in heavy rotation" they had to be cleaned between customers to maintain the desired standard.

78. Whilst gardening is not necessarily as embedded, given that not all properties will have gardens or grounds, we consider that these activities are ancillary or incidental as they would need to be undertaken where a garden exists. The panel considered that there was nothing particularly unusual or extraordinary about the gardens or properties that could distinguish their maintenance and upkeep in this context.

79. The welcome basket and the provision of books and DVDs is, we consider, characteristic of many businesses providing furnished holiday lettings.

80. We find that these activities are therefore ancillary or incidental to the business and are neutral in considering all of the issues. As set out by the Upper Tribunal in Pawson (and confirmed by the Court of Appeal), the fact that these activities involved a significant amount of time (and cost) does not mean that they should be given more weight.

Hospitality

81. As already noted, this was the primary aspect which was contended to distinguish this business. Ms Foster considered that the staff were not 'just chatting to guests', and that staff would get to know the likes and dislikes of customers and that they provided customers with the opportunity to talk and would spend time communicating with customers in person, ensuring that they had everything they needed.

82. The business provided (in summary) support and information which, it was contended, was something that was not ancillary to the furnished holiday letting business and which meant that the business was not mainly one of holding investments. Ms Gaines confirmed that she would 'get chatting' to customers and would respond to the customer where she could to ensure that the accommodation was to their liking.

83. For the appellants, it was contended (in summary) that a substantial amount of time and cost was involved in the provision of these services, and that they were non-investment services, and as such they should be regarded as determinative of the business as a whole not being mainly one of holding investments.

84. HMRC contended that none of this was unusual for a furnished holiday letting business and that none of this amounted to the 'concierge' type of service that had been sited to exist. At best the staff provided occasional assistance when requested. Further, HMRC contended that the evidence showed that customers came for the location rather than any other factor. The business was unable to charge a premium compared to the local area and many of the guestbook entries related to the property and location.

85. Having reviewed the guestbook entries in the bundle, we find that the vast majority of these are focussed on the accommodation and location, not the provision of any services. Letters had been obtained from a small number of regular visitors which the appellants put forward as showing that customers valued the services. The contents of these letters were generally that they enjoyed the quality of the accommodation and found the staff to be friendly and available. The writers had been invited by the appellants (from an email included in the bundle) to provide the letters and, further, to support the appellants contention that the services and facilities were comparable to those of a hotel. One letter, which did not appear to have been written in response to the business' request for support, made reference to the writer having recently enjoyed a holiday elsewhere. However, these were not witness statements and the writers were not present to be cross-examined. As such, we have given little weight to these letters in comparison to the guestbook entries which were not specifically requested for the purposes of supporting the claim for relief. As noted, these entries indicate that customers' primary interest was in having the use of the accommodation in that location.

86. Mr Knapper's witness statement set out (in summary) his view of the customer service provided by Ms Foster. He referred to the welcome basket (described above), noting that this included dog treats when they booked to bring their dog, and that a problem with the hearing system was quickly fixed. He noted that when they had asked, staff provided recommendations for places to visit and restaurants to eat at and, on one occasion had made reservations for them and had arranged for one of Ms Tanner's carers to act as a babysitter and, at a later visit, had arranged for a babysitting business. They had also learned to ask the staff for help if they had a health issue on holiday. Whilst Mr Knapper clearly appreciated the willingness of staff to respond to requests, there was no suggestion that he considered that the business provided a 'concierge' service as such.

87. We also note that Mr Knapper's witness statement concluded by referring to the quality of the accommodation and cleanliness being above that experienced elsewhere, and also site features such as the owner living on site and the site having good security.

88. We note that Ms Foster and her staff clearly enjoy meeting and interacting with their customers and - as stated by Ms Foster in evidence - will help guests wherever it is feasible for them to do so. This latter point is, we consider, important: this is a characteristic of the staff involved and not something which can be considered a service provided by the business as such. These features were not something which could be anticipated by a new customer as they were not advertised and not part of any contractual arrangement between the business and a customer. We note for example that Mr Knapper stated that he had learned to ask, not that he had known that he could ask from the outset. Similarly, we consider that these services could not be relied upon by a returning customer for the same reason; whilst the business had significant repeat business (the exact amount was unclear but we are willing to accept that it was significant) we do not consider that this is anything other than a neutral factor. Responding to customer needs where reasonable to do so is, we consider, equally characteristic of a business endeavouring to maximise its income from assets.

89. We consider that the evidence we were provided confirmed that much of this activity was reactive to customer requests: that is, if a customer asked or expressed an interest, they would be given information or assistance where practical to do so.

90. We note in particular Ms Foster's evidence in the hearing that this hospitality was not provided as a selling point but rather that staff were human beings with compassion who looked after their guests. They were not there to provide services on an everyday basis, as "it doesn't work like that". Similarly, although staff were often available on-site outside office hours, there was no call rota or similar to ensure that a member of staff would always be available if guests needed to contact them out of hours. The business did not have a mobile phone until 2017.

91. This is not intended in any way to diminish the care with which the business operates (now and at the relevant time), but we consider that the appellant's evidence describes the way in which the furnished holiday letting business is operated rather than something from which the business derived income to an extent that is capable of outweighing the investment characteristics of the business.

92. We also note Ms Foster's evidence that the business could not charge a premium in the local market, even though she considered that the business offered services which were not offered by their competitors. The business prices were set in line with those competitors and to do otherwise would be bad for business. We consider that this supports our view that the hospitality aspects of the business did not outweigh the investment nature of the business. As such, we do not consider that these activities are sufficient to make this a non-investment business.

93. With regard to the time and cost involved we have already noted the point in Pawson that it is the nature of the activities that is to be taken into consideration and that there was nothing in the analysis that indicated that activity and costs were seriously skewed to one end of the investment/non-investment spectrum.

Conclusion - considering all the evidence in the round

94. Both parties made significant reference to the decision of the First-Tier Tribunal in Graham. In the case of Graham, the 'personal care lavished upon guests' by Ms Graham was considered by the judge to be part of what distinguished that business. We noted that the decision is not binding on us, as it was another First-tier Tribunal decision. However, the conclusion that the business in Graham was non-investment was reached not only on the basis of that personal care but also because the business provided a heated pool, a sauna, a games room and bicycles for the use of all guests (the latter on payment of a fee) and also providing bed and breakfast accommodation on a limited basis. The 'personal care' also extended to organisation of communal barbecues for all guests, providing herbs, fruit and tomatoes from the gardens which guests could pick for themselves in season, and organising three or four wedding/anniversary events held at the property per year. Before Ms Graham died, she had been planning a writers' course at the site, which was held after she died.

95. These are all matters which, taken together, caused the judge to reach the decision that the business in Graham was an unusual furnished holiday letting business which "just" fell on the non-investment side. As noted above, we consider the reference to the business in Graham being 'exceptional' in that decision means (when read in context) that it is exceptional for a furnished holiday lettings business to qualify for relief, not that relief must be available to a furnished holiday lettings business which is of an exceptional standard.

96. Bearing all of this in mind, in the context of case law which is binding upon us, we have concluded that none of these factors, viewed individually, are sufficient to take the business over the non-investment line. Looking at the factors in the round, together, we reach the same conclusion. We consider that, looked at as a whole, this business primarily provides accommodation to customers. Any additional elements are ancillary to the accommodation or insufficient to render the business one which is non-investment even if the time involved is significant. We consider that the customers are buying the use of a property in which they could stay and use as their own, not purchasing a wider package of services which outweighs the provision of a place to stay.

97. In conclusion, we find that this business viewed as a whole is mainly one of holding investments. Whilst it may operate to a high standard and is clearly a well-managed business, when the entire business is considered in the round we find that the non-investment activities involved are not sufficient for it to fall on the non-investment side of the line.

98. The appeal is therefore dismissed.

99. The non-legal member would like it to be noted that this decision is reached with some regret because it does appear that case law on this aspect of business property relief has strayed from the apparent purpose of the underlying legislation, to support the continuation of genuine business activity whilst withholding relief from property held for purposes of long term capital benefit. However, this is something which can only be dealt with by the higher courts or Parliament: as noted earlier this Tribunal is bound by the decision of the Upper Tribunal in Pawson, particularly given the approval of the Court of Appeal to the approach set out there.

Right to apply for permission to appeal

100. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice.

101. Amended and reissued on 12/03/2025 March 2025 pursuant to Rule 37 of the Tribunal's Procedure Rules to amend a non-substantive point in the original decision dated 25/02/2025.

Release date: 12^th MARCH 2025

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Tanner, Executors for the Estate 0f v Revenue and Customs [2025] UKFTT 328 (TC) (12 March 2025) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09456.html Cite as: [2025] UKFTT 328 (TC)

First-tier Tribunal (Tax)