Trusts and Tax

Why is a business not always treated as a trade?

Business Property Relief can be a valuable relief and is available up to 100% if the Revenue is satisfied that the business for which it is being sought is a trading rather than an investment business. 

In considering Farmer – v – IRC the Inland Revenue Special Commissioner altered the basis for determining how an investment business should be viewed.  Previously the Courts had not considered a range of factors.  On this occasion the business comprised activities associated with the running of a caravan park. 

In following the views of the Special Commissioner that, with a business of this nature, matters should be looked at in the round, the Court of Appeal overturned the decision made at first instance. It held that the relief should be available because the holding of property was not the main element of the business - the emphasis was less on investment and more on trade. 

However, the Revenue will always look at the nature and purpose of the business to determine whether there is an investment business or trade. Where these straddle a grey line (such as furnished holiday homes), they will not definitely fall on one side or the other for the purpose of securing Business Property Relief. 
 

Felix Appelbe or Andrew Penfold are lawyers available to discuss such tax planning measures on 020 7242 7000 or use the Contact Request Form.

Printable version

© Ambrose Appelbe 2004-2008
This web site contains general information only and does not constitute legal advice. You should take suitable advice as to your specific circumstances. Ambrose Appelbe accepts no responsibility and disclaims all liability in relation to such information.