In Sir Keith Mills, Team Origin LLP v HMRC  [2017] TC05844 the First Tier Tribunal (FTT) disallowed sideways loss relief for a LLP formed to compete in the prestigious America’s Cup yacht race: there was little hope of any realisation of profits.

  • TeamOrigin LLP was formed to compete in, win and commercially exploiting the America’s Cup.
  • It planned to win two Cups in succession and make a cumulative profit in its 12th year of trading.
  • It was high risk project and that the prospect of making a profit was small.
  • It employed 67 people and had offices in London, Valencia, and Portsmouth.
  • It suffered losses of £32million over a four year period.

HMRC refused sideways loss relief under s66 ITA 2007 on the basis that the trade was uncommercial.

The FTT considered whether there a trade and if so was it operated on a commercial basis?

  • It found that there was an inherent uncommerciality of the America’s Cup for the years in question. The rules means that the previous year’s winner always held an advantage in setting the terms, of the next year’s race and some teams operated on the basis of  “money is no object”.
  • If the team did not win there was little hope of making a profit.

It decided that the appellant was not acting on a commercial basis because someone seriously interested in profit would not engage in a trade with such a likelihood of profit or level of return.

Our notes on this topic:

Losses and sideways loss relief

Losses (sideways) restriction for uncommecial trades

Case link

Sir Keith Mills, Team Origin LLP v HMRC  [2017] TC05844

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