Business Property Relief is a valuable Inheritance Tax (IHT) relief which can reduce tax due on business assets or shares in a business to nil. In order to qualify for relief, the business must not be wholly or mainly investment.
For example, historically, there has been a distinction between the letting of residential property, which is considered to be investment and so does not qualify, and hotels and B&Bs which are considered to be trading and so generally qualify. HMRC are taking an increased interest in whether property backed businesses are eligible for business relief from IHT.
In particular they are looking at the hospitality sector where the range of accommodation options has increased dramatically in recent years. While a traditional full service hotel offering including a restaurant is still likely to qualify, HMRC are looking critically at reduced service offerings such as room only hotels, aparthotels, serviced apartments and holiday lettings.