In Glapwell Football Club Limited v HMRC [2013] TC02904 a claim for loss relief was denied on the basis that a trade was not being carried out with a view to the realisation of profits.

Trading loss relief against general profits is restricted if the trade is not being carried on a commercial basis or with a view to the realisation of a profit, or so to afford a reasonable expectation of profit. Under the original legislation in ICTA 1988 the word "gain" was used instead of "profit".

  • Where there is a change in the manner in which a trade is being carried on in an accounting period, it is treated as having throughout the accounting period been carried on in that way in which it was being carried on by the end of the period.
  • When trading companies operate in a 51% group, trade losses may be surrendered by one company and relieved against the trading profits of another group member. Losses are restricted where companies have different accounting periods or trade for less than 12 months.

Glapwell Football Club Limited (GFC) was the loss making subsidiary of Denticheck Limited (D). GFC commenced trading in 2007 and ran a village football team with an annual turnover of £70,000 but match ticket sales and bar takings were insufficient on their own to cover the club's costs. The club had various problems from personnel to record keeping to local politics and made losses for the first three accounting periods, leaving it with a debt owing to its holding company of over £360,000 and accounts not being prepared on a "going concern" basis. Under three group loss relief claims GFC surrendered its losses to D. 

HMRC made a discovery assessment and whilst it accepted that GFC was carrying on its trade on a commercial basis, it refused loss relief on the basis that the business was not being carried on with a view to the realisation of gain in trade and particularly, that it was not being carried on at any relevant time so as to afford a reasonable expectation of gain.

The FTT considered the evidence:

  • GFC would not be able to make a profit from just running a local football team. 
  • Its directors, including its chairman, who controlled D, had plans to develop and operate a stadium and sports complex and promote football, however there no evidence to show that these plans had developed until after the end of the loss claim periods.
  • There were questions as to the security of tenure of GFC's sports grounds and friction with the parish council over the ground. 
  • No planning applications had been made and no funding for any form of development was in place during the loss making periods.

The FTT disallowed group loss relief as GFC's activities had not been carried on with a view to the realisation of gain.


The decision to deny loss relief may seem harsh given that many businesses make losses in their opening years however the FTT did not find sufficient evidence to back up the directors' claims that that they were planning development activities and so found according to the facts presented to them that there was no reasonable expectation of a profit (gain in the ICTA 1988 language). With hindsight it would have assisted the club if it had had regular board meetings in those early years to document the creation and writing of a business plan, and actually having a business plan from the outset may well have swayed the tribunal to come to a different conclusion.

The effect of the decision is that GFC's losses may be carried forward - presuming that there were later profits from the trade.

HMRC if often suspicious about commercial intent when there is a mix of sport and business. One danger may be that some people get too carried away with their hobbies to fully consider the tax implications, the other danger is that when you are making losses you assume that there will be automatic relief. Whilst there are special rules which restrict the availability of losses from farming and market gardening, HMRC will also block losses when it considers that an activity amounts to no more than a hobby. A hobby is generally classed as a non-commercial activity.

See Losses (sideway): restriction for uncommercial trades for more on uncommercial trades and hobbies in the context of income tax.