HMRC spent years fighting what it considered to be tax avoidance products offered by Property118, but a Tribunal has ruled against the tax authority. The Tribunal judgment in Property 118 Limited & Anor v HMRC [2026] UKFTT 1111 (TC) found that the Substantial Incorporation Structure (SIS) and Capital Account Restructure (CAR) were not tax avoidance products.
The Tribunal concluded that HMRC's central case, which argued that Property118's arrangements were tax-driven with commercial explanations as mere decoration, was unsustainable. This was after hearing evidence from landlords, accountants, solicitors, and mortgage professionals involved in the arrangements.
Landlords using SIS had two main reasons for their choices: to obtain full Incorporation Relief and to avoid refinancing at the point of incorporation for genuine commercial reasons. The Tribunal expressly found that SIS could preserve full Incorporation Relief in situations where refinancing might otherwise prevent it from being fully available.
The judgment also noted that Property118 did not invent concepts such as beneficial ownership, contractual indemnities, or the transfer of a business as a going concern. These were established concepts, with HMRC's own manuals and professional commentary recognising principles related to business liabilities and capital withdrawal before incorporation.