In Charlotte MacDonald v HMRC [2025] TC09504, the First Tier Tribunal (FTT) found that sideways loss relief could not be claimed in respect of an annual 'woodland shoot' on an estate. The activities were not carried on with a view to the realisation of profits.
Charlotte MacDonald (CM) owned a 1,500-acre private estate. The estate was mixed-use, consisting of arable land, grazing land, woodland, agricultural buildings, stables, paddocks, and residential buildings.
- The estate generated three income streams, these were:
- Rental income from residential properties.
- A biomass boiler, which provided energy for the buildings on the estate.
- The woodland shoot which consisted of shooting partridges and pheasants. It lasted for five months of the year.
- The 'shoot' prepared annual accounts with income being declared on CM's Self Assessment return.
- Losses on the shoot arose for several years. Sideways loss relief was claimed against general income.
- HMRC took the view that the losses were not eligible for sideways relief under s.64 Income Tax Act 2007, as the trade did not meet both elements of the 'commerciality test'. HMRC concluded that the shoot was not commercial and that there was no view to a profit.
- Closure notices covering a five-year period were issued. A Discovery assessment was also raised for an earlier year.
- CM appealed to the First Tier Tribunal (FTT).
S.64 ITA 2007 allows a person who has made a trading loss to make a claim for relief against their general income of the year of the loss, the previous year, or both.
- Both elements of the commerciality test in s.66 ITA 2007 must be satisfied for a loss to be relievable. The trade must be carried on:
- on a commercial basis, and
- with a view to the realisation of profits of the trade.
- S.66(3) provides that "if at any time a trade is carried on so as to afford a reasonable expectation of profit, it is carried on at that time with a view to the realisation of profits".
- S.66(4) allows for a trade forming part of a larger undertaking; any references to profits of the trade are to be read as references to profits of the undertaking as a whole.
The FTT was satisfied that the shoot was a trade carried out on a commercial basis. It was not a mere hobby for CM:
- CM was not residing on the estate; she travelled back and forth to host and captain the shoot.
- CM employed staff to assist with the shoot. She also managed bookings and catering for the shoots and devoted time to planning for the shoot each year.
- Targets were set, budgets produced, and costs analysed, each year.
- There was no personal motivation for CM to maintain the infrastructure of the shoot.
The FTT found that the shoot was not carried on with a view to the realisation of profits:
- Simply making losses over several years did not remove the fact that the trade was carried out on a commercial basis.
- Case law in Ingenious Games LLP clarifies that the 'with a view to a profit' element of the commerciality test is purely subjective and must be answered in the context of the business in question.
- Although certain events had occurred which 'blew the business off course', losses on the business had occurred in every year, except one, since 2005.
- The likelihood of making profits and the timescale in which they can be achieved are relevant in testing where there is a genuine subjective view of making a profit. In this case, barely any profit had been made in 15 years, and there was no reasonable expectation that a profit would be made.
- Considering all of the evidence given in balance, CM could not have reasonably expected that income would exceed expenditure.
- S.66(4) was not met. Despite being under the same ownership, the various other activities on the estate comprised separate activities that happened to share a location.
The appeal was dismissed.
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