Expectation of profit not shown

The taxpayer was a farmer who had run at a loss since 2002/03. His income was supplemented by rental income from a tenant who quarried part of the farmland and excavated gravel.

The taxpayer claimed relief for his farming losses against his rental income and capital gains arising from the disposal of part of his farm.

Citing ITA 2007 s 67(2) HMRC refused the claim saying loss relief was not due because he had made losses in the previous five years and had no reasonable expectation of profit (s 67(3)).

The taxpayer appealed.

The First-tier Tribunal said that under ITTOIA 2005 s 12 and s 335 profits arising from concerns such as mines and quarries were taxed as if they were from trades even though the source of the profits was the land. The taxpayer’s rental income fell into this category and...