Readers’ forum: Home and studio
Writing for Taxation magazine, BKL tax adviser Terry Jordan answers a readers’ forum query on the availability of business property relief on an artist’s studio.
My client is an elderly artist who operates his studio at home. Apart from the bedroom, kitchen and bathroom, the entire house is devoted to his studio and every other room has a considerable number of his works stored in them, all of which are available for sale. When the client dies, will it be possible to claim business property relief on that part of the house devoted to studio and storage?
For many years the client has provided HMRC with self-employed accounts for sales of his artistic works and the expenses in producing these.
Query 19,044– Artist.
Reply by Terry ‘Lacuna’ Jordan, BKL
The categories of ‘relevant business property’ are set out in IHTA 1984, s 105 (1) and the key question is whether the property falls within s 105 (1) (a) as ‘property consisting of a business or interest in a business’. The business must be carried on for gain: IHTA 1984, s 103 (3). The fact that for many years the client has provided HMRC with self-employed accounts for sales of his artistic works and the expenses in producing these is helpful.
In Seymour Ninth Marquis of Hertford v CIR  SSCD 177 the Eighth Marquis of Hertford made a potentially exempt transfer of his interest in Ragley Hall, the contents and the goodwill of the business. He died within seven years of the gift and the transfer became chargeable unless business property relief was due. Although only 78% of the house was open to the public (with all of the exterior being viewable from the outside) it was held that 100% business property relief should be afforded to the whole. On that basis it might be possible to claim business property relief on the artist’s entire house.
HMRC’s Inheritance Tax Manual at IHTM 25153 used to instruct that, if relief is claimed on the business of a painter, sculptor, musician or similar artist, it should be referred to the Technical Group. That part no longer appears in the current version of the manual but, curiously, searching for the word ‘artist’ still brings up a reference to that paragraph.