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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Business relief: Investment businesses: Hotels, Bed and Breakfast, Residential Homes, and other accommodation

IHTA84/S105(3) will not usually apply to these businesses in view of the level of services provided. This has been recognised by the courts who have distinguished these businesses from mere exploitation of land. In Griffiths (Inspector of Taxes) -v- Jackson 56 TC 583 at page 593, Vinelott J observed:

“The distinction between a hotelier or a lodging house keeper, on the one hand, and the owner of a property who lets furnished rooms and provides services is no doubt in practice a narrow one, more particularly in these days of self-service hotels and motels, but the principle is clear and in the present case there can be no doubt on which side of the line the taxpayer’s activities fall.”

Only in cases where it is clear that IHTA84/S105(3) applies should you pursue it. Any doubtful cases must be referred to Technical before an entrenched position is taken.

There are increasing numbers of businesses providing accommodation services for various groups, such as asylum seekers or vulnerable adults. The range of services provided in these businesses can vary enormously, and you will need to examine them in detail to establish where they sit on the non-investment/investment spectrum.

The self-service/ budget hotel industry has expanded considerably since Vinelott J’s 1982 observation, and you should also ascertain the nature of a ‘hotel’ business to establish whether on the facts it actually falls at the investment end of the spectrum.