Commercial for one year only

The taxpayer began a boat charter business in 2006. As well as trading as a sole proprietor in respect of private clients he set up a company B Original Ltd to handle the corporate charters on the basis a corporate image was more suitable.

He stopped trading as a company in 2009 and operated only as a sole proprietorship.

He claimed to offset losses from his sole proprietorship business against his other income for the years 2007/08 to 2009/10. HMRC disputed the figures and revised them down saying the sole proprietorship element had not been run commercially.

The taxpayer appealed.

The First-tier Tribunal noted – under the commercial test in ITA 2007 s 66 – a trade was commercial if it was carried “throughout the basis period for the tax year on a commercial business and with a view to the realisation of profits of...