As discussed in our Blog post Business Property Relief and Furnished Holiday Lettings in September 2018, the decision in Graham appeared to provide a welcome shift in the First Tier Tribunal’s position on the application of Business Property Relief (BPR) to furnished holiday lettings (FHL).
The tribunals have long maintained the position that FHLs will rarely qualify for BPR, as the value of the business is derived from the exploitation of a holding in land and therefore consists wholly or mainly of holding investments. However, in the case of Graham, a successful claim for BPR was made on the basis that extensive additional services were provided to holiday-goers and those additional services were sufficient to tip the balance in favour of that being a non-investment business.
In the recent case of Cox, the executors argued that the owner provided additional services to guests over and above the simple letting of the properties and even compared the provision of services to that of a hotel. The executors provided testimonies of former guests and accounting analysis including an allocation of time spent across different services. The additional services or “non-investment activities” provided by Cox included the use of gardens, laundry, book lending, dog-sitting, baby-sitting, therapies, sports equipment, tennis courts, golf, an arts festival, and specially arranged restaurant visits and picnics.
HMRC opposed the executors’ argument, claiming that most activities mentioned were “just normal holiday activities that are possible at most holiday accommodation and were not provided by the business” and that there was little evidence as to the extent of any non-investment activities. HMRC also distinguished the services from those provided by a hotel stating, “the facilities and services typically provided at an exclusive hotel were not available to a guest”.
The First-tier Tax Tribunal agreed with HMRC stating that “there was nothing exceptional about the business to elevate it to the level of the business found in Graham which qualified for BPR”. The Tribunal distinguished Cox from Graham concluding that the additional services provided in Graham went far beyond those provided in Cox. The judgement went as far as to say that the non-investment activities in Cox were so insignificant in scale as to be negligible and the accounting analysis was rejected as irrelevant. The Tribunal held that any additional services must “predominate to such an extent that the business ceases to be mainly one of holding the property as an investment”.
Cox represents yet another decision against BPR for FHLs, proving that Graham was a notable exception to a long line of unsuccessful BPR claims and that the threshold to qualify for BPR is still very high. To successfully claim BPR, it would seem that the nature and extent of the additional services provided, over and above the simple letting of accommodation, is what counts.
 Personal Representatives of Grace Joyce Graham (Dec’d)  UKFTT 0306 (TC)
 Cox (Executors) v HMRC 2020 UKFTT 442 TC