A recent First-tier Tribunal judgment, Alan Pontin & Ors v HMRC [2026] UKFTT 1166 (TC), has brought renewed scrutiny to HMRC's guidance regarding property tax. The ruling, issued just a week before HMRC updated its controversial 20-hour guidance for landlord Incorporation Relief, addresses the question of how substantial business activity is assessed when undertaken by employees, contractors, and professional advisers rather than solely by the owner.
HMRC had amended its CG65715 guidance on 20 August, accepting that less than 20 hours a week spent on property activities could still qualify as a business for Section 162 purposes. However, the updated guidance retained the phrase "personally undertaking" when describing the activities officers should consider.
The Pontin case, which involved the sale of shares in Highland Holdings Limited, examined whether the underlying company, Associated Properties UK Limited, was a trading company. The Tribunal's decision highlighted that a significant amount of development work was carried out by directors through associated companies and by external planning consultants, not solely by employees on the company's payroll.
The Tribunal concluded that when assessing a company's physical activities, work and effort supplied by individuals who are not employees or directors can be taken into account. This aligns with the principle that "contractors’ services can be used without that preventing a trade being carried on."