The Upper Tribunal’s construction of the ‘reasonable expectation of profit’ test was correct and the taxpayer was not entitled to ‘sideways’ income tax relief for any of the five years of claimed losses.

The taxpayer (a businessman with no previous experience of running a farm) purchased a working farm and surrounding agricultural land in January 1995. He decided to convert the farm to organic production, increase its size substantially, and work towards ways of selling directly to the public. He also made other significant changes to the running of the farm. The taxpayer acquired further land and extended the farm.

The farm generated