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Farm Trading Loss Relief Disallowed As Farming Activities Did Not Satisfy Profit Test

By Mark McLaughlin, February 2016
The taxpayer’s claim to offset farming trade losses against general income was disallowed, as the losses did not satisfy the statutory ‘reasonable expectation of profit’ test.

The appellant was an experienced sheep farmer. He claimed trade loss relief in respect of farming losses during the tax years 2008/09 and 2009/10 against his general income (under ITA 2007, s 64). HM Revenue and Customs (HMRC) made discovery assessments disallowing the loss relief claimed. The appellant appealed.

HMRC’s view was that, as the appellant’s farming trade had made losses in each year since 2000/01, ITA 2007, s 67 (which provides that relief for a farming loss against general income is not available if a trading loss was made in each of the previous five tax years) applied. The appellant appealed, contending that, as the heading preceding section 67 refers to ‘hobby’ farming and he was not a hobby farmer,
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