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Riding the waves

10 May 2016 / Julie Butler
Issue: 4549 / Categories: Comment & Analysis

Problems can arise when an activity straddles the boundary between a hobby and a business.


  • Sideways loss relief claimed from activities that might 
    be classed as hobbies are likely to come under scrutiny from HMRC.
  • Three recent First-tier Tribunal cases illustrate refusal of loss relief.
  • An explanation of the Lennartz mechanism.
  • Forward planning and ability to justify loss claims is essential.
  • Activities will need to be considered in the round to determine whether a business is being carried on.

Income tax loss claims arising from anything that amounts to a ‘hobby’ – for example yachts and horses – have recently come under close scrutiny by HMRC and this is reflected in a number of tribunal cases. The equine activities in Three Cases such as McMorris (TC04204)  Thorne (TC03851) and Murray (TC03474) – where large tax losses were claimed sideways (under ITA 2007 ...

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