Do readers know of any cases or decisions, or guidance in relation to any comparable "events businesses", that which support the case for a particular tax treatment of the following?
This seems to fall into a "grey area" - whether income from land / property is to be treated as "property income" or "trading income".The owners [technically occupiers] of a private residential property make it available ["run it as a venue"] for private dining, business meetings and wedding events. The events can be for any duration, part of a day or longer than a week. The owners occupy, manage & maintain the property, and ensure it fulfills all fire-safety standards and have registered it as a venue for civil marriage. The guests are provided with information about / recommendations for caterers, taxis & chauffeurs and marques, bands and DJs and flower arrangers. The owners can/will [do sometimes] arrange all services the guests require, as a package. The guests can also stay overnight in [have exclusive use of] the property.
The owners believe that they are trading - the frequency of the events [although never more than 1 wedding a week{end}], and the professionalism of the management is adequate to constitute a "business" and the business satisfies many of the "badges of trade" {BIM20205}. However, it is clear that HMRC tend to take the view that "income derived from rights of property in UK land is very unlikely to be trading income except in a hotel or guesthouse activity".
The business competes with many hotels for similar business, and the owners believe that this supports the case for 'trading'. However it might be equally reasonable to assume that a person who allows others to use their property for weddings might be treated as though they were receiving "income from letting others use land" as the example, where a film crew pays to film inside a house or on land {PIM1051}.But, the business is similar to that offered by many hotels
A recently reported tribunal case Julian Nott v Commissioners for HMRC [2016] suggests that it is increasingly difficult to satisfy the definition of a "trade". In the case the First Tier Tribunal is reported to have considered whether income from letting furnished holiday cottages was "property income" or "trading income". It found, among other matters that:
- 1) it did not regard the legal basis on which customers occupied a property or the length of their occupation to be material factors in determining whether there was a trade; and
2) for the services provided to displace the presumption that the income was property income, the services provided needed to be sufficiently substantial to convert what was being sold into a package of services of which the accommodation enjoyed by guests or customers is only a part.
- 1) "what is the activity giving rise to the payment?" and
2) "what are customers paying for the use of the land or a package of services forming part of a trade?”
Any [closely] comparable businesses [involving private estates, etc] known by any readers?