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Less Tax For Landlords – The Flawed Business Property Relief Claim

We are writing this article as a result of the extensive enquiries we have received from Landlords who engaged in planning offered by Less Tax for Landlords and the Bailey Group.

HMRC’s view (and that of every other tax expert) is that the planning does not work. HMRC’s views are set out in Spotlight 63. They can be seen here.

In this article, we will look at Business Relief, explaining what it is, when it applies, what LT4L and the Bailey Group have told their clients and why their view is incorrect.

What is Business Relief

Business Relief (formerly known as Business Property Relief) reduces the value of business property for inheritance tax. It is available on the transfers of business assets during lifetime or upon death. To qualify, the business asset must usually have been owned throughout the two years before death or transfer.

There is no Business Relief if the business or company is one of ‘wholly or mainly’ in dealing in securities, stocks or shares, land or buildings or in the making or holding of investments.

A business that only generates investment income will not attract BPR, so this excludes:

  • A residential or commercial property letting business.
  • A property dealing business.
  • A serviced office business.

This means relief is not available to landlords with rental property.

The legislation is contained in Section 105(3) and (4), IHTA 1984.

In deciding whether a business consisted “wholly or mainly” of one or more of these prohibited activities, the courts will look at the business in the round, taking into account all of its activities both at the date of the transfer and over a reasonable period of time before the transfer (which may be several years), to see if one or more prohibited activities predominate – see the case of  George v IRC [2003] EWCA Civ 1763. This means that the test will be applied to the specific facts in each case. Most of the case law considering the ‘wholly or mainly’ test has looked at whether a business is mainly involved in investment activity rather than trading or service provision. 

It therefore seems incontrovertible that BPR or Business Relief is NOT available to Landlords. It defies belief that Chris Bailey, LT4L and the Bailey Group told clients that Business (Property) Relief was available and that the deceased’s estate would not be met with a significant Inheritance Tax liability upon the death of the deceased.

The (Flawed) Basis of the Advice given to the participants in this planning

We must repeat that there is not one tax professional who agrees with the assertion of the availability of Business Relief.

The following is an example of a discussion between Chris Bailey and a tax professional who questioned this aspect of the planning.

Trusted Advisor: You indicated that by structuring the property business in the particular way that you do, you create a trade which would benefit from BR, giving IHT exemption after 2 years. Business relief is not available for businesses which wholly or mainly involve the making or holding of investments. HMRC considered the holding of rental properties an investment business, which I appreciate is a business and can qualify for s.162 TCGA, but regardless of whether it qualifies for incorporation relief is specifically excluded from Business Relief under s.105(3). As such, unless the business of the LLP relates more than 50% to something other than the holding and letting of residential property, then I don’t see how it can qualify for BR, particularly when 100% of the income, management time and expenditure relates to the letting of rental properties.

Chris Bailey: The LLP holds the equity and not the properties – so it cannot be classed as an investment. The owner of the properties will not qualify for BR on the properties, but on the equity.

Trusted Advisor: I don’t understand how holding equity in a property ‘cannot be classed as an investment’. The case of M ROSS v HMRC (2017) confirmed that the exploitation of land in return for rent is still an investment business (this was an FLH (Furnished Holiday Let) case so related to a business that tax law recognises as a trade) and denied business relief. What is the business doing which is not the exploitation of land which would elevate the activity beyond that of a furnished holiday let? Caselaw in recent decades has been very clear that a business must offer significantly more than just the exploitation of a proprietary interest – what additional services do you suggest are being provided by the business, which means it’s not an investment?

Chris Bailey: Once again, unfortunately, we have had clients die during the time that they have been clients and HMRC have accepted all of our Probate calculations based on the above. The cases range from small cases (about £1m assets) to larger cases in excess of £5m assets.

Elysium Law have been approached by clients who, having submitted the claim for Business Relief as advised by Chris Bailey et al via Accountancy and Legal Solutions UK ( which is now OCG Legal and part of the Less Tax for Landlords group of companies), have now received a review of the claim.

So, does it work? – No

Here is an extract from HMRCs letter to the client (redacted to protect any identity:

“The executors returned business assets valued at REDACTED on the IHT400 reporting the IHT Account for REDACTED’s estate. The IHT400 return shows that business property relief was claimed against the full value of these assets.

I am aware that Accountancy and Legal Solutions UK have provided advice to other taxpayers with similar investment businesses in respect of Business Property Relief claims and that those claims have been determined invalid (Our emphasis). Therefore, I am conducting a review to confirm the validity of the Business Property Relief claim in respect of REDACTED’s estate.

REDACTED’s IHT400 return states that the business assets comprised a property management and development business. I have conducted a review of the deceased’s individual tax returns and the tax returns of both REDACTED Ltd and REDACTED LLP but have not been able to identify any evidence of business activity beyond the holding of property as investments.”

HMRC are now claiming the IHT on the full amount, which runs into millions of pounds, in addition to interest on the unpaid IHT, which is racking up at a significant daily rate.


  • The planning does not work and if you have engaged in it, you will suffer losses;
  • Elysium Law has now been approached by numerous clients who have submitted claims for BPR during probate that have been rejected;
  • The deceased’s estate not only faces a significant increase in the IHT payable but also considerable interest, which is increasing daily as well as penalties;
  • We have not seen any advice from Chris Bailey or LT4L to contradict HMRC and Elysium Law believe that the Executors who have submitted claims for relief as a result, have a claim in professional negligence.

Elysium Law has an outstanding track record of bringing, defending, and settling high-value and complex cases.

Contact us today for more information if you have been affected, completing our enquiry page or call us at 0151-328-1968