In a recent First Tier Tribunal case, Charlotte MacDonald v HMRC, a taxpayer was denied sideways loss relief for losses that she had incurred when organising an annual ‘woodland shoot’ on an estate because the activities were not carried on with a view to the realisation of profits.
A taxpayer can offset trading losses against their general income in the year of the loss, the previous year, or both. In order to do this, the loss must have arisen from a trade that was carried on:
- on a commercial basis, and
- with a view to the realisation of profits of the trade.
HMRC argued that the shoot was not commercial in nature and that there had been no view to a realisation of profits.
The First Tier Tribunal found that the shoot was carried on on a commercial basis, in that it was not merely a hobby for the taxpayer. However, since the shoot had started, it had made a loss in every year except one. Barely any profit had been made in 15 years, and there was no reasonable expectation that a profit would be made.
On this basis, the conditions for claiming sideways loss relief were not met and the appeal was dismissed.
