Racing uncertainty

The taxpayer bred and trained racehorses. He began his business in 2005 but did not notify HMRC until he submitted a 2007/08 tax return in which he claimed cumulative losses of £51 378. He claimed further losses totalling £81 406 in the years 2008/09 2009/10 and 2010/11.

The Revenue enquired into the taxpayer’s 2010/11 return and decided the losses were not allowable because he was not trading on a commercial basis with a view to making a profit (ITA 2007 s 66).

The First-tier Tribunal noted the taxpayer had assumed his activities would be sustainable if the losses were allowable.

The judge considered there may have been a reasonable expectation of profit at the start of the taxpayer’s business but the economic downturn high running costs and consistent losses led to hope of profit disappearing. A lack of income supported the view.

The tribunal was...