Importance of trading for business property relief

A new case on business property relief (BPR) and the ‘investment exclusion’ in IHTA 1984 s 105(3) highlights how important it is for farming businesses to pay careful attention to the tax consequences of diversifying. In Eva Mary Butler and others (TC8949) the focus was on a barn converted to a wedding venue. Better planning might have allowed the diversified business to obtain BPR. As it was Mrs Butler’s estate had to pay more than £1.6m inheritance tax.

This successful wedding venue – one experienced and enjoyed by several members of our tax team – seemed to be an extensive business with several employees not merely renting out a barn as an investment. The tribunal’s decision to deny BPR may therefore seem harsh to many particularly in the sad circumstances explained below.

Delegating the management function

The case concerned the estate of Mary...