Executors of Keith Denis Lewis Beresford v The Commissioners for HMRC

Under section 105(3), whether a company’s business consists wholly or mainly of making or holding investments is a fact-sensitive evaluation of the business as a whole. Holding land to obtain income lies at one end of a spectrum, but creates no presumption. Property management directed at maintaining the investment differs from additional services to occupiers, which remain non-investment activities whether separately charged or included in a fee. Their character and significance depend on their nature, purpose and contribution to the business overall. The legal form of the occupier’s rights is not a prerequisite to finding an investment business. Some trading activity using an asset does not, by itself, prevent the business from being mainly an investment business.

Keith Beresford owned all the shares in Fiveteam Limited, which in turn owned Ninecourt Limited. Ninecourt owned a commercial building with two floors let on conventional leases and four floors operated as serviced offices. Orega Management Limited managed the serviced offices as Ninecourt’s agent.

After Mr Beresford’s death, his executors claimed business property relief on the transfer of value associated with his Fiveteam shares. HMRC determined that relief was unavailable because Ninecourt’s business consisted wholly or mainly of making or holding investments. The First-tier Tribunal dismissed the executors’ appeal: [2024] UKFTT 952 (TC). The executors appealed, challenging the legal approach and several factual inferences. The Upper Tribunal had to decide whether Ninecourt’s business fell within the exclusion in section 105(3).

1. Disposition. The Upper Tribunal set aside the First-tier Tribunal’s decision because it wrongly treated the supply of heating, electricity and air conditioning as investment management. It re-made the decision, confirmed HMRC’s determination and dismissed the appeal against that determination.

2. The statutory inquiry. Section 105(3) requires a factual evaluation of the company’s business as a whole, from the viewpoint of an intelligent business person. Exploiting a proprietary interest in land for income is an investment activity in principle, but it is one end of a wide spectrum and gives rise to no presumption. The tribunal must assess the activities in the round. Relevant factors may include the business context, capital employed, employee time, turnover and profitability. These are not a tick-box exercise; their weight varies with the circumstances. The Upper Tribunal followed the approach in George v HM Revenue and Customs [2003] EWCA Civ 1763 and applied the factors identified in Farmer and anor (exors of Farmer, decd) v IRC [1999] STC (SCD) 321.

3. Investment activity, trading and services. An asset’s use in a trade does not automatically prevent the company’s business from being mainly an investment business. The nature and extent of the trade must be weighed against the investment activities. Property management aimed at maintaining or enhancing the property’s value and obtaining regular letting income is investment activity. Additional services to occupiers, such as heating and cleaning, are non-investment activities whether their cost is separately charged or included in a fee. In an ordinary property letting business, however, such services may be insufficient to alter the business’s mainly investment character. The Upper Tribunal applied George and HM Revenue and Customs v Pawson [2013] UKUT 050 (TCC). It also held that the classification does not depend on whether occupiers receive a proprietary interest or exclusive possession. The income-tax distinctions considered in Coman v Governors of Rotunda Hospital [1921] 1 AC 1, Fry v Salisbury House Estate Limited [1930] AC 432 and Griffiths v Jackson [1983] STC 184 did not determine the section 105(3) question.

4. Application. The FTT was entitled to find that the facility fee predominantly paid for the use of identified office space. Advertising, negotiating terms and maintaining office equipment could be treated as investment management. The supply of heating, electricity and air conditioning was instead a non-investment service. But those services were not material enough to change the substance of the package: a licence to use an office. The parties had agreed that the facility fee’s classification would tip the balance. Viewed in the round, the facility fee was investment income and Ninecourt’s business was mainly one of making or holding investments. Section 105(3) therefore excluded the shares from relevant business property.

5. Appeal and remedy. An appellate tribunal should read the FTT’s decision fairly and as a whole, and should not interfere with evaluative findings unless an error of law is shown. The Upper Tribunal found no error in most of the challenged inferences, but the error about utilities might have affected the outcome. It set aside the decision and re-made it on the FTT’s permissible findings. Remittal was not sought.

1. Upper Tribunal (Tax and Chancery Chamber): [2026] UKUT 285 (TCC) . Set aside the FTT decision after finding an error in its treatment of utility services, then re-made the decision to confirm HMRC’s determination and dismiss the appeal against it.
2. First-tier Tribunal (Tax Chamber): [2024] UKFTT 952 (TC). Held that Ninecourt’s business consisted wholly or mainly of making or holding investments and dismissed the executors’ appeal against HMRC’s determination.