Most CFOs treat Business Property Relief as a private-client problem until an owner dies, a PE secondary crystallises, or a board paper needs a number for “IHT-efficient equity.” The Executors of Keith Denis Lewis Beresford (Deceased) v HMRC [2026] UKUT 00285 (TCC), released 29 July 2026, is a reminder that hybrid property businesses sit on the wrong side of the line more often than the marketing deck suggests.
The Upper Tribunal (Judges Jonathan Cannan and Amanda Brown KC) dismissed the executors’ appeal. Shares in a holding company that owned a High Holborn building run partly as serviced offices did not qualify as relevant business property. The underlying business consisted mainly of making or holding investments under section 105(3) of the Inheritance Tax Act 1984. BPR was refused.
If you have flexible workspace, multi-let commercial, PE holdcos with “service-heavy” property subs, or succession plans that assume 100% relief on property-backed equities, read this before the next valuation committee.
What the group actually did
Mr Beresford owned 100% of Fiveteam Limited. Fiveteam owned 100% of Ninecourt Limited. Ninecourt’s main asset was 16 High Holborn — a six-floor commercial freehold.
- Two floors (about 11,000 sq ft) were let on ordinary commercial leases.
- Four floors (about 21,000 sq ft) operated as serviced offices under a management agreement with Orega Management Limited.
- Clients occupied under licences, not long leases, with flexible space allocation.
- Income came as “facility fees” for workstations and the standard package (reception, cleaning, utilities, maintenance), plus separate “contract services” fees for extras such as meeting rooms, catering and photocopying.
On the 2017 figures referred to in the decision, facility fees were about £2.27m, contract services about £578k, and conventional rent about £503k. Most of the money was the facility fee — the package that looks “operational” on a slide deck and “occupation of land” in a tribunal.
That mix is why CFOs get this wrong: the P&L looks active; the statute asks a different question.
The statutory test that kills most of these claims
BPR only attaches to “relevant business property.” Section 105(3) IHTA 1984 excludes a business that consists wholly or mainly of making or holding investments. HMRC’s manuals put property-based hybrids under that microscope — see IHTM25266 on property-based businesses and SVM111160 on the meaning of investment, including earlier business-centre authorities.
The case law spectrum is familiar to private-client counsel and under-used in corporate board packs:
- HMRC v George (Executors of Stedman) [2003] EWCA Civ 1763 — the land-business spectrum between investment and trade.
- HMRC v Pawson [2013] UKUT 050 (TCC) — holiday lets as investment unless services dominate.
- HMRC v Vigne [2018] UKUT 357 (TCC) — no automatic presumption, but facts still decide.
- Farmer v IRC [1999] STC (SCD) 321 — look at the business “in the round” (capital, time, turnover, profit, overall context).
Earlier FTT decisions on business centres — including Zetland and Best — already pointed the same way. The FTT in Beresford ([2024] UKFTT 952 (TC)) refused BPR. The UT has now closed the appeal route on these facts.
What the Upper Tribunal actually held
Two points matter for finance leaders.
First, a technical win for the taxpayer did not save the claim. The UT found the FTT had mischaracterised the supply of heating, electricity and air-conditioning as “investment management.” Those supplies are services. Because of that error of law, the UT set the FTT decision aside and remade it.
Second, on the remake, the result was identical. Viewed in the round, the facility fee was still mainly the price of a licence to occupy office space. The services package was real, but not material enough to change the character of the business. A reasonable business person would treat the facility fee as investment income. Ninecourt’s business as a whole was mainly making or holding investments. Fiveteam, as a pure holding company of that business, followed the same fate. Appeal dismissed.
In the UT’s own framing (around paragraphs 160–161), utilities and the wider package did not alter what the client was really buying: occupation of an office in the building. That is the sentence to put in the risk register.
Why this is a CFO issue, not only a will-drafting issue
BPR is not confined to death. It drives:
- owner-manager succession and family investment company design;
- PE and private-company secondary pricing where personal IHT drag affects seller behaviour;
- holdco/SPV maps that assume “trading group = BPR” without testing the investment exclusion;
- board valuations and key-person insurance narratives that capitalise relief which is not there;
- lender and investor DD questions on estate liquidity for founder-controlled groups.
The practical failure mode is always the same. Operations call it a workspace business. Tax counsel call it land exploitation with ancillary services. The tribunal sides with the latter unless services truly dominate the bargain.
Ross Martin’s write-up of the FTT stage is blunt for a reason: serviced offices were not relevant business property on these facts (Ross Martin summary). The UT has not softened that message. It has hardened it.
The numbers that decide the “mainly” test
Do not argue brand. Argue composition.
In Beresford, conventional rent was the smallest of the three pots. Facility fees dwarfed everything else. The tribunal still treated facility fees as investment-character income because the core deliverable was space. Extras and outsourced management did not flip the character.
That means your internal management accounts need a BPR cut, not only a statutory accounts cut:
- income from pure occupation rights vs income from separable services;
- cost and headcount attached to services vs property holding;
- who employs the people who face the customer — you, or a manager like Orega;
- whether clients are buying a room, or buying an operated service in which space is incidental;
- capital employed in the building vs capital employed in systems, staff and IP.
If 70%+ of profit is still the right to sit in a building, you are on the investment side of the line no matter how many meeting-room SKUs you sell.
CFO checklist before the next ownership event
1. Map every property-backed subsidiary against s105(3), not against your website copy. Flexible office, business centre, light-industrial multi-let with “amenities,” storage-plus-services, and some care/clinical hybrids all sit in the danger zone. Start with HMRC’s own framing in IHTM25265 (wholly or mainly) and IHTM25266.
2. Separate the holdco question from the opco question. Fiveteam failed because Ninecourt failed. A clean holding company does not create BPR. It transmits the character of what it holds.
3. Stress-test “outsourced operator” models. Appointing a specialist manager can improve EBITDA and customer experience while weakening the taxpayer’s “we run a trade” narrative. Document what the company itself actually does day to day.
4. Rebuild the evidence pack now, not in the executor’s first 100 days. Board minutes, service catalogues, staffing organograms, licence vs lease templates, and a turnover bridge from facility fee to pure service income are the documents tribunals actually use. Marketing PDFs are not.
5. Price the no-BPR case in succession and PE models. If relief is 0% rather than 100%, estate liquidity, cross-option funding, life cover and drag-along mechanics all move. Do not discover that in probate.
6. Align tax, legal and ops before any reorganisation sold as “BPR planning.” Moving assets, granting new licences, or bolting on concierge services after a risk diagnosis can create its own IHT questions. Sequence matters.
What this does not mean
It does not mean every property-plus-services business fails. It means the bar is high, the “in the round” test is real, and occupation-led facility fees are treated as investment income unless services are material enough to change the bargain. A genuine operated service business where land is incidental can still win on different facts.
It also does not make BPR worthless. Trading groups and genuine operational platforms still rely on it. The point is narrower: do not bank relief on a High Holborn-style serviced office stack because the management deal looks sophisticated.
Bottom line
Beresford is fresh authority, released 29 July 2026, that serviced-office economics — even with flexible licences, an external operator, and real ancillary services — can still be “mainly” investment for IHT BPR. The UT corrected a legal mislabel on utilities, then still refused relief.
For CFOs the action is immediate: identify property-service hybrids, rebuild the s105(3) analysis, put a no-relief scenario into succession and exit models, and stop treating BPR as a private-client footnote when the failing asset sits on your balance sheet.
Full decision: UT PDF on GOV.UK. Official summary page: HMRC v Beresford executors (UT listing). For the legislation spine, keep s104 and s105 IHTA 1984 next to the manuals above.
This article is general commentary for finance leaders, not advice on any person’s estate or any group’s relief position. BPR outcomes are fact-specific; take formal advice before acting.