An analysis of the case of Butler and the availability of Business property Relief in relation to a wedding events business

The recent case of Butler considers services provided by the wedding events business and whether or not these qualified for business property relief.

Business Property Relief (BPR) provides a valuable relief from Inheritance Tax (IHT) on the transfer of relevant business assets. If the appropriate conditions are met and BPR applies, it is possible to claim 100% relief from IHT.  In order to qualify for BPR, a business must be wholly or mainly trading as opposed to wholly or mainly holding investments, which means more than 50% trading.

In the recent case of Butler (Butler & Others v HMRC [2023] UKFTT 00872), the Tribunal took the view that the wedding barn business was mainly one of holding investments and denied BPR on the business. This decision hinged on the nature of the services provided.

Whilst there is a great deal of case law surrounding the investment exclusion, none of the case law relates directly to businesses operating wedding venues. The recent cases have usually involved furnished holiday lets, and in these cases, BPR has been granted only in exceptional circumstances.

What were the facts in Butler?

At the time of her death, Mrs Butler was a member of a Limited Liability Partnership (LLP). The business carried out the following activities: farming, commercial lettings, and weddings - the wedding business being the largest of its activities.

It was undisputed that the farming element of the business was a trading activity, and the commercial lettings element was an investment activity. The key question was whether the activities of the wedding business were classified as trading or holding investments, as this would determine whether the business as a whole would qualify for BPR.

The appellants described themselves as providing a “package of services”. Various facilities and services were originally provided by the wedding business. The wedding team had played an active part in the preparation for, and management of, their customer’s wedding day. They would liaise with customers on open days and provide recommendations of various third-party suppliers. The maintenance team would organise the setup of the barn, including installation and reconfiguration of furniture, providing decoration where requested and making sure the garden was tidy.

However, from June 2013, catering services were provided by a third-party caterer. The caterer took over many of the event management responsibilities previously carried on by the wedding team. They provided a ‘front of house director’, who was responsible for running the event, meeting the couple and providing food and drinks service. Essentially, much of the event management activities which were previously fulfilled by the LLP were now provided by the caterer.

On Mrs Butler’s death, HMRC refused a claim for BPR, arguing that the business should be characterised as wholly or mainly holding investments and therefore was not eligible for BPR. 

The Tribunal’s decision

The Tribunal took the approach of examining each element of the wedding business, and then stood back and considered the activities of the business in the round from June 2013 until the date of Mrs Butler’s death.

The Tribunal concluded that the business fell more on the investment side as most of the activities were no more than would usually be provided by a person letting out a property. The judge commented that the amenities and services provided by the LLP were not exceptional in their nature. During this period, a third party (the caterer) undertook most of the functions of the LLP, including bookings and catering.

The Tribunal considered the broad spectrum of activities relating to event venues, ranging from the hire of a village or community hall at one end of the spectrum, and a fully serviced conference venue that provides a complete wedding event package at the other end.

The Tribunal dismissed the appeal, ruling that the wedding barn business was not relevant business property and it was therefore not eligible for BPR on the following grounds:

• At no point did the business offer facilities and services that went significantly beyond those that are provided in a property held predominantly for investment purposes.
• Looking at the business ran by the LLP as a whole, the judge found that the business has always fallen on the village/community hall side of the spectrum and away from the fully serviced conference venue.
• Whilst the level of business activities was more significant prior to the appointment of the catering company in 2013, even then the business still fell to be treated as one of holding investments.

Conclusions

Whilst the outcome might not be wholly unexpected given the Tribunal’s established stance on furnished holiday lets, Butler serves as a clear reminder that there needs to be a high-level of facilities, services and time input to meet the criteria to qualify for BPR.

For property-based businesses, it is important that the level and nature of any additional services is carefully considered as the bar remains extremely high. Although there were additional services and amenities provided in Butler, these were not considered to be exceptional in nature.

It is important that the business is monitored on an ongoing basis, particularly if it engages in a mixture of trading and investment activities. Appropriate planning must be undertaken to ensure that a business is structured to maximise the chance of it securing BPR.