HMRC faces scrutiny over property tax guidance and relief reforms

Recent developments in UK tax policy and judicial rulings have highlighted complexities regarding property and inheritance taxes. A First-tier Tribunal judgment in the case of Alan Pontin & Ors v HMRC has raised questions about HMRC’s guidance for landlord Incorporation Relief. While the case did not directly address Section 162, it challenges the wording of HMRC’s guidance regarding whether business activities must be “personally undertaken” by an owner or can be performed by employees and contractors.

Separately, data from HMRC and HM Treasury regarding the reformed Business Property Relief regime shows that changes to inheritance tax are impacting estates holding “not listed” shares. While the government increased the 100% relief allowance to £2.5 million for combined agricultural and business property, shares on AIM and other unlisted exchanges no longer qualify for this allowance and instead receive a flat 50% relief. This shift is expected to contribute to a significant number of estates paying higher inheritance taxes in the 2026 to 2027 period.