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N Erridge (TC4294)
The taxpayer and his wife bought a farm in 1982 and the neighbouring farm in 2002. Both deals were funded by bank loans – as was the purchase of a third farm in 2006
The couple’s business made a profit before capital allowances of £2 977 in 2004/05 but made losses for subsequent years to 2012/13.
They commissioned a review from the Scottish Agricultural College in 2010 which suggested measures to return the farms to profit.
The taxpayer was also a full-time dentist. He applied to set the farming losses against his other income. HMRC refused the claim on the ground sideways loss relief was not available because ITA 2007 s 68(3)(b) was not satisfied.
The department said “At… 5 April 2005 the business would reasonably have been expected to be profitable by 5 April 2011. If that is the case then the test...
