In Richard Murray v HMRC TC 03474, the First Tier Tribunal disallowed a sideways claim for trade loss relief against general income. The trade was not run on a commercial basis.

There is a restriction for trade loss relief for uncommercial trades. Its effect is to deny tax relief when a claim is made to offset a trade loss against general income.

  • Richard Murray's (RM) horse bloodstock breeding and racing business made losses for four years, and in one year turnover was "nil".
  • He owned three geldings and a mare that could possibly be used as a brood mare.
  • None of the horses had been sold and only one horse had ever been raced.
  • He had never produced a business plan and had written to HMRC saying that the economics of his business “greatly depended upon the contribution from [his] tax rebates”.
  • HMRC argued that case law clearly demonstrates that horse racing is not a taxable activity.

The FTT held that at the start of his business, RM did have a reasonable expectation of profit. By 2010/2011 that hope or expectation had disappeared and the high annual costs with almost consistent losses, and that the fact that there was never any income reinforced this view. Trade loss relief against general income was denied.

It is up to the taxpayer to show that a trade is capable of realising profits. Horse racing is not regarded as acommercial enterprise and whilst breeding can generate profits the taxpayers geldings are incapable of breeding and so the taxpayer was on


Link: Richard Murray v HMRC [2014] TC 03474