Property run as business

The taxpayer inherited a one-third share of a block of flats in 1987. She took over the administration for the whole building in 2002 and gifted half of her share to her husband in February the following year.

The couple spent about 20 hours a week attending to the building making sure the rent was paid on time cleaning communal areas forwarding post to tenants who had left and ensuring the property was insured and complied with fire regulations.

The taxpayer purchased the rest of the building from her brothers – and in September 2004 she and her husband transferred the property to TPQ Developments Ltd in exchange for shares in the company. The couple made a gift in August 2005 of all their shares in TPQ to their son who became the sole shareholder and director of the firm.

HMRC ruled...