Hotel taxation and HMAs

Key points

• If there is a trading activity and subject to meeting other criteria the shareholders may be able to benefit from business asset disposal relief or investors’ relief.
• Both reliefs deliver a 10% capital gains tax rate but they are mutually exclusive.

When recently sipping a coffee in a hotel lobby I was pondering (being between books) that there are a number of ways in which a hotel might be owned and operated and that each of these will have a raft of different tax consequences. In the following scenarios I am going to assume that the freehold to a Brighton hotel is owned by ‘HotelCo’ a single purpose entity which is ‘property rich’. The scenarios to be explored are:

1) UK tax resident friends and family own the shares in HotelCo (in this scenario a UK tax resident company) which owns the freehold...