Reasonable expectation of profit

The taxpayer was an experienced sheep farmer and a partner in a farming partnership that owned a large sheep farm. He had also been in business outside farming and received a pension from it. He applied for trade loss relief under ITA 2007 s 64 against his other income on farming losses for the years 2008/09 and 2009/10.

HMRC refused the claim saying that s 67 applied because the farming activities did not meet the reasonable expectation of profit test in s 68.

The taxpayer appealed saying that s 67 applied to hobby farming and he was not a hobby farmer.

The First-tier Tribunal said s 67 applied an objective test: was a loss made in the trade in each of the previous five years? It made no reference to whether a trade was carried on commercially or whether the person carrying it on had a view to...