The Upper Tribunal found that the First-tier Tribunal was entitled to conclude that the activities of a general partnership did not amount to a trade for the purposes of ‘sideways’ loss relief for its members.

The appellant general partnership (‘Foundation’) was established in July 2008. Its initial partners were an individual (TL) and a company, which was a subsidiary of another company. In 2007, TL became aware of ‘Project Adriatic’, an informal co-venture between third party investors to construct a hotel, residential apartments and a trade fair in Montenegro.  

Foundation was formed to be an investment vehicle into which investors would subscribe. It was intended that investors would be able to set sideways any trading loss realised by Foundation against the investors’ own taxable income. TL had hoped that Foundation would raise £25m from external investors. However, by 3 April 2009, it had