Partnership was not carrying on a trade

A general partnership entered into a complicated series of transactions designed (to use a neutral word) to provide support to a construction project in Montenegro. The intention was that the partnership would be able to write down its initial acquisition of rights under a construction contract thus creating a loss which individual partners who had invested in the partnership would be able to set against other income.

The First-tier Tribunal had found that there was a lack of commerciality about the partnership’s operation so it was not carrying on a trade. That was a finding of fact and could only be overturned by the Upper Tribunal on Edwards v Bairstow and Harrison grounds.

The Upper Tribunal was clear that this was not possible. The lower tribunal had applied the correct legal tests. It had accepted that the contracts were not shams but the transactions effected by them...