Let property did not qualify for business asset taper relief
A recent case before the tribunal examined the applicability of business asset taper relief. In this case two taxpayers appealed against HMRC’s decision that a let property which they had sold was not a business asset.
The property in question was given to the taxpayers by their mother and was let out as fully furnished small bedsit flats producing a monthly rental income. The property was sold in November 2005 and the capital gains tax calculation inlcuded a claim for business asset taper relief. This treatment mirrored the way the property had been treated for many years as relating to a ‘trade’.
HMRC contended that the property was a non-business asset and issued the closure notice amending the taxpayers’ self-assessment returns to only apply non-business taper relief on the sale.
The taxpayers’ accountant contended that the ‘scale’ of the letting income from the property comprised a trade and sought to demonstrate using old correspondence with HMRC that it was HMRC that had directed a previous accountant to treat the property income as relating to a trade.
The taxpayers argued that even if the correct treatment was that the property did not relate to a trade HMRC were effectively stopped from denying the way the property had been treated and that business asset taper relief was applicable.
However the tribunal did not agree with this view stating that “a decision on one tax could not settle anything more than the bare issues of that one liability and could not create an estoppel in relation to the succeeding year or in a different tax”. The taxpayers’ appeal was dismissed.
The tribunal judge commented that where questions of unfairness or legitimate expectation arise, these issues can only be examined through the courts rather than a tribunal.