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In Ernest Thomson & Ors v HMRC [2018] TC 6598 the First tier tribunal decided three taxpayers who dealt in contracts for difference were not trading; they were not able to offset losses against income from other sources.

Trading losses can be offset, in the current year, or previous tax year, against other income:

Mr Thomson, Mr Worsfold and Mr Mungavin all entered into a contract for difference (CFD) investment through an investment company based in the Seychelles as part of a tax avoidance scheme:

The FTT found that these activities were not commercially pursued with a view to a profit.

The judge did not have to consider the tax avoidance motive point as he was clear that the losses were not trading losses in the first place.

Links to our guides:

Losses, trade losses and sideways relief
Losses (sideways): restriction for uncommercial trades
Is it a trade, a business, or an investment activity?
Spotlight 28 on CFDs in employment

External links:

Ernest Thomson & Ors v HMRC [2018] TC 6598