Insufficient involvement

The taxpayer worked full-time for J. In his spare time he ran a yacht charter business. A management company was responsible for renting out the vessel.

The taxpayer claimed capital allowances on the yacht and applied to offset the losses against his other income under TA 1988 s 380.

HMRC refused the claim saying the taxpayer was not involved substantially in running the yacht-chartering. The department raised discovery assessments for the years 2003/04 to 2006/07 on the ground that the taxpayer had been negligent in not making a full disclosure of the business.

The taxpayer appealed.

The First-tier Tribunal decided the management company acted as the taxpayer’s agent in arranging charters: it provided the lease of the yacht and various services inherent in the leasing.

The taxpayer could not set the losses arising from capital allowances against his general income because he did not meet the...