Chapter BIM37625

Record NumberBIM37625
Published date22 November 2013

S34 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), S54 Corporation Tax Act 2009

Researching possible emigration

In the case of Sargent v Eayrs [1972] 48 TC 573, the expenses incurred by a Gloucestershire farmer visiting Australia with a view to emigrating and buying a farm there were not allowed as a deduction from the profits of a trade.

The Commissioners found that the visit had little of value to offer as far as farming in the UK was concerned, and the main purpose of the visit was to ascertain whether conditions and prices in Australia were such that emigration would be attractive.

The Crown argued that:

  • what is now S9 ITTOIA 2005 provides that all the farming carried on by any particular person be treated as one trade related only to farming in the UK, and
  • in any case the expenditure in question was capital

The Commissioners determined that the expenditure was wholly and exclusively for the purposes of the trade.

However, the High Court concluded that the expenditure was not allowable. Accepting the Crown’s approach to what is now S9 ITTOIA 2005, Goff J agreed that the taxpayer’s farming trade was confined to the UK. Therefore, expenditure connected with a possible extension to farming in Australia could not be for the purposes of the farmer’s trade. Goff J gave the Court’s reasons at page 577:

`If and so far as the Commissioners found that the expenditure was wholly and exclusively laid out or expended for the purposes of the Respondent’s trade, they could not, in my judgment, have so found...

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