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Investment or Business? 12.04.12

A recent First-tier Tribunal has ruled that rollover relief in relation to a property letting enterprise – has been disallowed on the basis there was no ‘business’ being carried on.

This is a significant decision. It suggests that unlike in previous cases, active management may not be enough.

The case concerns a large house in Belfast which the owner had divided into flats and let to tenants. The property was then transferred to a company and the owner claimed rollover relief under s162 TCGA 1992 in relation to the deemed gain.

Following an enquiry, HMRC denied relief on the grounds that the property was not a ‘business’.

The owners claimed that letting the property constituted a business and that they spent approximately 20 hours a week carrying out various activities including:

  • Meeting with tenants
  • Paying electricity bills for communal areas
  • Providing assistance to an elderly tenant including liaising with social services in relation to her care package.
  • Checking windows and doors to the property were locked
  • Repairing and maintaining communal areas.

The First-tier Tribunal found that the actions undertaken by the owners in maintenance and refurbishment was undertaken to maintain and enhance the investment and maximise rental income. The fact that the property was let out as a number of flats (i.e. not just a single property) did not mean that the ownership of the property amounted to a business

Lavinia Newman of ABDS says:

“Following this decision, anyone contemplating the use of s.162 roll over relief in similar circumstances needs to take note of HMRC’s and the tribunal’s position and take professional advice on whether something is an investment or a business.”

If you need any help and advice on the implications of Property Ownership, Letting and Taxation, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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