An earlier First-tier Tribunal decision to allow the taxpayer’s sideways relief claims in respect of farming losses was overturned due to errors in law in its application of the ‘reasonable expectation of profitability’ test in the relevant legislation.  

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 and increase its size substantially to obtain benefits of scale. He also decided to work towards ways of selling directly to the public and made other significant changes to the running of the farm. The taxpayer acquired further land and extended the farm.

The farm generated losses in all years until 2012/13, although it was profitable every year since. Following an enquiry into the taxpayer’s self