News that business property relief from Inheritance Tax can be secured on farmers’ holiday cottages has been given a cautious welcome.

A recent tribunal ruled in favour of allowing the tax break, which had normally only applied to properties where the farmer took an active role with the holidaymakers’ activities and level of service they received during their stay.

HM Revenues and Customs had previously refused tax relief on a holiday property due to it not meeting these conditions – leading to the appeal being launched.

Andrew Arnott, a partner of Saffery Champness Landed Estates and Rural Business Group, said: “This is of significant interest to landowners, farmers and indeed anyone letting a holiday property.

“The services provided to the occupiers of the property were not within the terms set out by HMRC, but even so the tribunal found the services provided (clean bed linen, heating, etc) to be significant, and over and above what would be provided by a property owner letting a property as an investment, and accordingly the business did not consist of holding an investment.

“It is very good news for owners of holiday letting properties who up until now had assumed that BPR would only be available if the criteria laid out in the HMRC manual were met.

“It remains to be seen whether or not HMRC will appeal against the tribunal’s decision.”