Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property118. Read the original article for full details.

Tribunal Case Highlights Ongoing Uncertainty in HMRC’s 20-Hour Landlord Guidance

A recent First-tier Tribunal decision has brought renewed attention to HMRC’s guidance on landlord business activity, just days after HMRC amended its controversial 20-hour rule for Incorporation Relief. The case, Alan Pontin & Ors v HMRC [2026] UKFTT 1166 (TC), raises questions about how HMRC treats business activities carried out by employees, contractors, and advisers rather than by landlords themselves.

Seven days before HMRC updated its guidance (CG65715) on 20 August, the Tribunal handed down its decision in the Pontin case. The case did not concern Section 162 Incorporation Relief directly, but it addressed a related issue: whether substantial business activity performed by people other than the property owner counts towards the statutory test for running a property business.

The Pontin case involved the sale of shares in Highland Holdings Limited, which owned a property in Henley-on-Thames. The property was reclassified from an investment asset to trading stock after the directors decided to develop it for residential use. Over several years, significant work was undertaken to promote the site through the planning system and secure its inclusion in the local Neighbourhood Plan.

The Tribunal considered whether the company met the definition of a trading company under Section 165A TCGA 1992. HMRC conceded that the company was carrying on activities with a view to starting a trade and that the trade began as soon as reasonably practicable. The remaining issue was whether ongoing rental income meant the company still had substantial non-trading activities.

The Tribunal, relying on the Upper Tribunal’s decision in Assem Allam v HMRC [2021] UKUT 291 (TCC), took a holistic approach. It considered all commercial activities, including physical and financial activity, income, expenditure, assets, and wider circumstances, rather than focusing solely on rental income.

For letting agents and inventory clerks, this case highlights ongoing uncertainty in HMRC’s approach to property business activity, especially where work is carried out by employees or advisers. The recent amendment to HMRC’s guidance accepts that landlords spending fewer than 20 hours a week may still be running a business, but questions remain about the requirement for activities to be “personally undertaken.”