A view to a profit

The director of the taxpayer property company decided yacht chartering would be a profitable side business and purchased a 92-foot motor yacht which could be chartered for €8 000 a day or €35 000 a week.

The vessel made annual losses of about £50 000 for the first three years. In the next two – ended 31 March 2001 and 31 March 2002 – it made profits of £77 000 and £103 000.

The yacht suffered major engine failure in 2003. Its new engines proved unsuitable leading to further costs and litigation against the fitters leading to total losses of £1m in the period 2009 to 2012.

HMRC commenced an enquiry into the company accounts in 2008 and subsequently issued amended assessments disallowing losses relating to the yacht chartering for the 2009 2010 2011 and 2012 years.

The Revenue accepted that the yacht chartering was...