Is letting property a business, a trade of simply a passive investment? 

This was the subject of a recent Upper Tribunal case, an issue which has far-reaching consequences for landlords seeking CGT relief on incorporation.

In HMRC v GCH Corporation Ltd and others, released in June 2026, the question was, does a limited liability partnership need to be a trading entity to satisfy the running a “business with a view to profit” test in section 59A of the Taxation of Chargeable Gains Act 1992.

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A new word on the meaning of “business”

For as long as landlords have considered incorporating their portfolios, the same question has come up: is letting property a "business" or merely a passive investment? 

This distinction matters because section 162 relief * - The Taxation of Chargeable Gains Act 1992 – only allows roll-over relief on incorporation where a genuine “business” is transferred. HMRC has long taken the view that simple property letting, without active management, falls short of the “business” threshold.

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*Section 162 Incorporation Relief defers Capital Gains Tax (CGT) when transferring personally owned property portfolios (a “business”) into a limited company. Instead of paying CGT immediately, the gain is deducted from the base cost of your new shares. Tax is only paid when the shares are eventually sold. 

To be eligible for section 162 relief, HMRC requires your property portfolio to operate as a genuine business, rather than a passive investment. You must therefore meet some key tests, the main one being your activities must be significant, typically requiring around 20 hours of active, continuous management per week.

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The GCH Corporation appeal was not a section 162 case. It concerned section 59A Taxation of Chargeable Gains Act 1992 (TCGA), which determines whether a limited liability partnership is treated as transparent for capital gains purposes. 

But in reaching its decision, the Upper Tribunal overlapped directly with the wider body of case law on the meaning of “business” and consequently this is relevant to portfolio incorporation. The decision includes a leading authority that landlords have relied on for incorporation relief, which is Elisabeth Moyne Ramsay v HMRC. That makes the judgement worth understanding, even for landlord readers who will never form an LLP.

The facts in brief

The case arose from a tax mitigation scheme involving family trusts and a corporate vehicle. GCH Corporation Ltd was wanting to defer a capital gain. HMRC argued that the LLP was not carrying on a trade or business with a view to profit, so the contribution should be taxed as an immediate disposal. 

The First-tier Tribunal found for the taxpayers in October 2024, holding that although the LLP was not trading, it was carrying on a business with a view to profit. HMRC subsequently appealed to the Upper Tribunal, which heard the case in March 2026 and handed down its decision on 12 June 2026. 

What the Upper Tribunal decided

The tribunal upheld the First-tier Tribunal's judgement. The LLP’s activities, which consisted of acquiring a small number of listed shareholdings, selling some at a profit and receiving dividend income, did not amount to a trade. But they did amount to a business, the tribunal had said. 

The Upper Tribunal confirmed that “business” is a broader concept than "trade" and that an investment business, even a relatively passive one, can satisfy a “business” test where the statutory context allows it.

Crucially, the Tribunal rejected HMRC’s argument that the LLP’s purpose was simply tax mitigation and therefore could not be a genuine business. The Tribunal had accepted that tax planning was part of the LLP’s purpose. But it held that this did not prevent it from also carrying on a genuine investment business with a view to profit. The two were not mutually exclusive, it decided.

Why does this matter for property incorporations?

The Tribunal’s reasoning on “business” looked to Elisabeth Moyne Ramsay v HMRC, the 2013 Upper Tribunal decision that remains the leading authority on whether a property letting activity is a “business” for Section 162 incorporation relief. 

It stated that it would adopt the same approach as Ramsay, having regard to the Lord Fisher factors (drawn from VAT case law) and the overall degree of activity undertaken, when assessing whether the LLP was carrying on a business.

This is a strong endorsement. The Upper Tribunal in GCH Corporation did not simply note Ramsay’s existence; it adopted Ramsay’s methodology as the appropriate framework for assessing “business”. 

For landlords and their advisers, this reinforces the central proposition that has underpinned incorporation planning since 2013: that “business” is generally a broader concept than "trade", that profit-seeking investment or letting activity can qualify for CGT relief even where management is relatively light-touch, and that the presence of a tax-efficiency motive does not, by itself, disqualify a genuine commercial activity from being a "business".

What it doesn’t change

None of this removes Section 162 case law itself. GCH Corporation does not relax the test for incorporation relief. It doesn’t set a new threshold or remove the need to demonstrate a sufficient degree of activity.  

The Ramsay decision, and the cases that have applied it since, remain the direct authority landlords and their advisers must work from. GCH Corporation is best understood as persuasive support for the broad direction of that case law, not as a determination of any individual landlord’s position.

It is also worth noting that the case was decided on its own facts. The FTT had found the LLP’s stated business purpose, however limited in execution, to be genuinely pursued. However, HMRC could still challenge a weaker case on incorporation relief where the actual activity undertaken falls short of what Ramsay and later authorities require.

Some key takeaways

Landlords considering incorporation should keep three points in mind: first, you need detailed documentation showing a substantial commercial substance to the letting of property, activity involving management decisions, time spent on management, and the practical steps involved in running the portfolio. 

This evidence base remains essential, regardless of the GCH Corporation decision. Secondly, don’t assume that having tax efficiency as your motive for incorporating will undermine a genuine business claim. 

Equally, don’t rely on motive alone to establish a business case. Third, always take specialist tax advice before you incorporate. Section 162 relief remains based on the facts and case law is continuing to develop in this area. In other words, there’s still a good degree of uncertainty involved.

A useful addition to case law

HMRC v GCH Corporation is a useful addition to the body of case law on what “business” means in UK tax law. It is an endorsement of the Ramsay approach and will be welcomed by landlords and their advisers working on incorporation planning. 

But it is not a substitute for a proper section 162 analysis based on the facts of each individual case.

The key points for landlords to consider when deciding on incorporation:

A "business" definition is generally broader than “trade” under UK tax law. However, the meaning still depends on the specific context.

Investment or letting activity can amount to a business, even when it is relatively passive, provided there is a sufficient degree of management activity.

Having a tax-efficiency motive does not, on its own, prevent a genuine commercial activity from being treated as a business.

Section 162 incorporation relief still depends on the Ramsay line of authority and the specific facts of each portfolio.

Keep detailed records of management decisions, the time you spend, and your practical involvement in the letting business, well before you planned to incorporate it.

Take specialist tax advice before incorporating; it’s not an area of the law that a landlord can navigate successfully without professional advice.