Charlotte Macdonald v The Commissioners for HMRC
| Judge | DUNCAN MCBRIDE |
| Judgment Date | 01 May 2025 |
| Neutral Citation | [2025] UKFTT 495 (TC) |
| Year | 2025 |
| Court | First-tier Tribunal (Tax Chamber) |
| Counsel | For |
| Date | 01 May 2025 |
Neutral Citation: [2025] UKFTT 00495 (TC)
Case Number: TC09504
FIRST-TIER TRIBUNAL
TAX CHAMBER
[Taylor House]
Appeal reference: TC/2023/00140
INCOME TAX – loss relief – loss in trade – whether a trade was carried on by the Appellant
– yes – whether the trade made a loss – yes – whether the Appellant’s trade losses can be set-
off against generalincome under section64 of the Income Tax Act 2007and/or whether
there are restrictions under section 66 which bar the Appellant from claiming the losses
against her general income – the two conditions in section 66(2) – whether the trade was
carried on ‘on a commercial basis’ and ‘with a view to the realisation of profits’ – the need
to satisfy both elements of the test and the wholly subjective qualitative test of ‘with a view to
profit’ – whether profit needs to be the predominant aim – no – the context of the trade in
question and the way in which the trade is conducted – the realistic possibility of profit –
whether the trade is part of a larger undertaking – no – Appeal dismissed
Heard on: 27 February 2025
Judgment date: 1 May 2025
Before
JUDGE NATSAI MANYARARA
DUNCAN MCBRIDE
Between
CHARLOTTE MACDONALD
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant:Mr Michael Firth KC
For the Respondents: Mx Cleo Lunt, Litigator of HM Revenue and Customs’ Solicitor’s
Office
DECISION
INTRODUCTION
1.This appeal concerns whether theAppellant(Charlotte Macdonald) was eligibleto
claim sideways loss relief against her general income. The Appellant owns a 1,500-acre
privateestate in Bretby, Derbyshire (“the Estate”). The losses were said to have been
incurred in relation to a woodland shoot (“the Shoot”) which took place on the Estate during
the tax year(s) in question.
2.The Appellant appeals against a discovery assessment (“the Assessment”), raised on
25 March 2021, for the 2016-17 tax year. The Assessment was raised pursuant to s 29 of the
Taxes Management Act 1970 (“TMA”). The Appellant also appeals against closure notices
issued pursuant to s 28A TMA (“the Closure Notices”), for the 2017-18 to 2020-21
(inclusive) tax years. The Closure Notices were issued on 21 September 2022.
3.HMRC concluded that by virtue of the application of s 66 of the Income Tax Act 2007
(“ITA 2007”), the losses generated by the Shoot and shown in the Appellant’s tax returns
were not available to be set off against the general income in those tax years. T he Appellant
was not, therefore, eligible to claim relief from the losses. Therefore, the losses claimed in
each of the relevant years were disallowed and income tax was charged, as follows:
Tax year ended20212020201920182017
Total income£202,212.00£323,273.00 £278,180.00£352,293.00£302,016.00
Loss relief claimed£19,043.00£46,330.00 £44,006.00£65,693.00£71,329.00
Loss relief due£913.00£173.00£803.00£5,094.00 £2,521.00
Additional tax due£8,158.50£20,763.50£19,580.23£27,269.55£30,867.451
4.Although HMRC originally assessed the Appellant for the 2015 and 2016 tax years,
HMRC are not defending the assessments raised for those years.
ISSUES
5.The issues in this appeal are:
(1)whether the Appellant is able to claim the losses made by the Shoot against her
general income in each of the relevant years under s 64 ITA 2007; or
(2)whether there are restrictions under s 66 ITA 2007 which bar the Appellant from
claiming the losses against her general income.
6.This, in turn, requires consideration of:
(1)whether the Shoot was carried on on a commercial basis and with a view to the
realisation of profits (“the Commerciality and Profitability Issue”); and/or
(2)whether the Shoot was part of a larger undertaking (“the Larger Undertaking
Issue”);
BURDENANDSTANDARDOFPROOF
The Assessment
7.In accordance with s 29(1) TMA, HMRC bear the burden of proof of establishing that a
loss of tax has been discovered. Once this has been established, the burden of proof shifts to
1 The proposed sideways loss relief is equal to the loss from a Biomass boiler on the Estate. This resulted in a
variance from the original Assessment for 2017, in which the entire sideways loss relief claim was denied,
including that from the Biomass boiler. The Assessment was therefore varied from £32,001.90 to £30,867.45.
1
the Appellant to provide evidence to either reduce, or set aside, the Assessment. In this
respect, s 50(6) TMA provides that if, on an appeal, it appears to the tribunal that an appellant
is overcharged by an assessment, the assessment shall be reduced, accordingly, but
“otherwisetheassessment…shallstandgood.” TheAppellant,therefore,hasthelegal
burden of demonstrating that she is overcharged by the Assessment.
Closure Notices
8.The burden of proof is on HMRC to show that the Closure Notices were validly issued.
Theburdenof proof then shifts to the Appellant to show that the Closure Notices are
incorrect, or excessive. As confirmed by the UpperTribunal (‘UT’) in ShinelockLtd v
HMRC[2023] UKUT 107 (TCC) (‘Shinelock’), the matter in issue in relation to an appeal
against a closure notice is the conclusion notified in the closure notice - albeit not limited to a
stated reason for that conclusion - and the associated amendment arising from such
conclusion.
9.The standard of proof is the ordinary civil standard; that of a balance of probabilities.
AUTHORITIESANDDOCUMENTS
10.The authorities to which we were specifically referred by the parties were:
(1) Wannell v Rothwell (HM Inspector of Taxes)[1996] 68 TC 719 (‘Wannell’ v
Rothwell’);
(2) Brander v HMRC [2009] UKFTT 101 (‘Brander’);
(3) Brander v HMRC [2010] UKUT 300 (TCC) (‘Brander (UT)’);
(4) Kerr v HMRC [2011] UKFTT 40 (TC) (‘Kerr’);
(5) Charles Atkinson v HMRC [2013] UKFTT 191 (TC) (‘Atkinson’);
(6) Samarkand Film Partnership No3 & Ors v HMRC [2017] EWCA Civ 77
(‘Samarkand’);
(7) Seven Individuals v HMRC[2017] UKUT 0132 (TCC); [2017] STC 874 (‘Seven
Individuals’);
(8) Jerome Anderson v HMRC [2018] UKUT 159 (TCC) (‘Anderson’);
(9) Beacon v HMRC [2018] UKFTT 104 (TC) (‘Beacon’);
(10) Ingenious Games LLP & Ors v R & C Comrs[2019] UKUT 226 (TCC)
(‘Ingenious Games (UT)’);
(11) Roulette V2 Charters LLP v HMRC[2019] UKFTT 537 (TC) (‘Roulette V2’);
(12) CHF Pip! Plc v R & C Comrs [2021] UKFTT 383 (TC) (‘CHF’);
(13) HMRC v Tooth [2021] EWCA Civ 826 (‘Tooth’);
(14) Ingenious Games LLP & Ors v R & C Comrs[2021] EWCA Civ 1180
(‘Ingenious Games (CoA)’).
11. The documents to which we were referred were: (i) the Documents Bundle consisting
of 894 pages; (ii) the Supplementary Bundle consisting of 13 pages; (iii) the Authorities
Bundle consisting of 589 pages; (iv) HMRC’s skeleton argument dated 17 February 2025;
and (v) the Appellant’s skeleton argument dated 17 February 2025.
2
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