House Used for Employee Accommodation is Business Asset

The owner of a Chinese restaurant has succeeded in his claim that a residential property used to provide accommodation for the restaurant’s employees was a ‘business asset’ for the purposes of taper relief from Capital Gains Tax (CGT).



The house, which had been purchased in September 1995, had been used as accommodation for employees who worked at the owner’s restaurant in Oxford and, following the restaurant’s closure in 2002, another restaruant in Bicester. The employees did not pay rent and the provision of accommodation to them had been correctly accounted for as a benefit in kind for Income Tax and National Insurance purposes. In 2004, the workers were moved to another property.



The house was sold in October 2006 and the owner claimed business asset taper relief in respect of the gain on the sale. HM Revenue & Customs (HMRC) challenged this on the basis that a business asset must be used ‘wholly or partly’ for the purposes of a trade. As the provision of accommodation was not part of the restaurant’s trading activities, HMRC argued that the house could not be considered a business asset.



The First-tier Tribunal disagreed with HMRC’s interpretation of the relevant legislation and concluded that the house was a business asset. Business asset taper relief was therefore available on the gain.



Although taper relief from CGT has now been abolished, what constitutes a ‘business asset’ is still important in respect of reliefs from capital taxes – for example, entrepreneur’s relief.