It is certain that many landowners will have noted with interest the recent decision in the case of HMRC v Brander. In this case, HMRC lost a lengthy battle concerning business property relief that had been withheld on Whittingehame Estate, a 2,000 acre traditional estate at one time owned by former British Prime Minister, Arthur Balfour.
The current law of business property relief states that a business does not qualify for such relief if it consists wholly or mainly of operations which deal in securities, stocks or shares, land or buildings or making or holding investments. The estate itself carried on a range of business activities – some trading (the main farming partnership), and some investing. The question before the court in this case was whether the whole of such a “mixed” business could qualify for business property relief.
HMRC argued that it could not and sought to deny business property relief to certain parts of the estate which it saw as being part of the investment business. Amongst other arguments, HMRC pointed towards the fact that separate accounts were prepared for the farming partnership as well as separate bank accounts being held.
The court disagreed, and decided in favour of the taxpayer, stating that although there were different aspects to the business, matters were handled with an eye to the overall benefit of the estate itself. Consequently, the investment activities were seen to be ancillary to the main farming business and business property relief was held to be available over the entire business.
The decision is comforting news to owners of traditional landed estates carrying on a range of business activities, who can expect to qualify for business property relief on the same basis as the Balfour case. The case is also a timely reminder of the importance of structuring one’s business carefully in order to ensure that any investment activities carried out are only ancillary to the business’ main trading activities. Regular reviews are highly recommended in order to ensure that any excessive investment assets are stripped out and the right to business property relief is preserved. At the time of writing HMRC have not decided whether to appeal the decision.