Revenue Precedents

Losses can be claimed in the fourth year in a commencement situation. Section 662(5) indicates that the restriction on relief for losses does not apply for a year of assessment if the trade was set up and commenced within the last three years of assessment before that year. IT943513

Trade of farming is regarded as forming part of and being ancillary to the larger trade of dealing in land for the purposes of claiming relief for farm losses in the fourth consecutive year. Section 662(2)(e) of the Taxes Consolidation Act 1997 provides that relief is not to be denied where the loss making farm is part of and ancillary to a larger undertaking. The subsection is designed to meet cases such as that of a butcher who makes a practice of fattening bullocks for his business, or a manufacturer who grows his own raw materials or a seedsman, a chemical manufacturer or a fertiliser manufacturer who runs a farm for testing or improving his products. The phrase “part of and ancillary to” is interpreted strictly. Ancillary means subservient and annexed to (Croom – Johnson J in Cross v Emery at 31TC198). It implies a close operating link with and contribution to the larger undertaking. The question of whether the carrying on of the trade of farming forms part of the trade of dealing in land is a matter of fact. Prima facie, it is highly unlikely that it could form such a part. The farming operations are not sufficiently linked to the trade of dealing in land nor do they contribute to that trade. The trade of farming cannot therefore be regarded as being ancillary to the trade of dealing in land. IT973007