Pawson Case

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Dear all
You will be aware that in early 2012 HM Revenue and Customs (HMRC) took a case to the first-tier tax tribunal to argue that a furnished holiday let should not be entitled to business property relief and so be exempted from inheritance tax. This was the Pawson Case. HMRC were unsuccessful and decided to appeal. It is a tricky appeal for them as such cases rest on the facts and the facts are determined by the first-tier tax tribunal and cannot be revisited by a higher court.
The appeal case was heard by the upper tax tribunal on 18 December and the verdict is awaited. Helen Lewis from Francis Clark attended the hearing and so we are fully up to speed with the current argument in this case. I remain optimistic that the upper tax tribunal will find against HMRC as their decision to deny business property relief on furnished holiday lets from late 2008 onwards is unsupported by previous case law and practice. The HMRC change of practice in 2008 has caused confusion and difficulties although the Pawson decision was also unexpected as the scale of activities at the property in that case were so low. It therefore means that almost all holiday lets qualify for business property relief.
We must now wait and see what the outcome in this case is and a decision is expected fairly early in the New Year. In the meantime, claims for business property relief should be made on furnished holiday let properties although a challenge by HMRC on the basis that the Pawson decision is not yet final is pretty much inevitable.
I will be in touch further when the latest Pawson decision is announced.
Merry Christmas and I hope next year will be both prosperous and drier!
Regards
John Endacott /

[charles cawley]

This is really useful. Thank you.