HMRC removes TBA agreement on stud losses

The guidance in HMRC’s Business Income Manual at BIM 55725 ‘Farming: stud farms: losses in stud farms’ covers allowability of losses in the breeding of horses. With regard to the application of the hobby farming loss restriction rule to stud farming a concession was confirmed in a letter sent in 1982 to the Thoroughbred Breeders’ Association (TBA) which has always previously been included under BIM 55725. This stated the following:

‘It has always been recognised that some ventures are by their nature unlikely to show a profit by the sixth year of trading and section 397(3) [now either s 68(3) ITA 2007 or s 49(3) CTA 2010] provides for loss relief to be continued after the fifth year where the claimant is engaged in a particular farming activity of an intrinsically long term profit making nature we have long accepted that the breeding of thoroughbred horses...