Some expenses allowed

Icebreaker 1 LLP was formed in February 2004 to conduct a trade of film distribution. In April 2004 six individuals joined the partnership contributing capital of £1.52 million between them 70% of which had been funded by non-recourse loans advanced by Bank of Scotland.

The partnership submitted its tax return claiming most of its expenditure as a trading loss for the period. HMRC opened an enquiry into the return and eventually issued a closure notice reducing Icebreaker 1’s losses from £1 491 816 to £11 900.

The partnership appealed.

The First-tier Tribunal concluded that most of the losses claimed were not allowable and dismissed the appeal.

The partnership appealed.

The Upper Tribunal (Tax and Chancery Chamber) said TA 1988 s 74(1)(a) made clear that only sums wholly and exclusively laid for the purposes of the trade...