Farm losses - Carry forward of farm losses
09/07/1996
Query
Whether in the circumstances of the case farm losses were available for carry forward in accordance with section 27 FA 1974. The case involved a professionally managed stud-farm which had losses for many years. It was contended that the farming activities were carried on in a professional and in a competent manner. The losses were attributed to conditions in the industry; farming activities had been scaled down to reduce overheads.
Decision
Section 27(1)(d) FA 1974 could have the effect that losses would be allowed for an indefinite period, provided the taxpayer can show that his activities are of such a kind as would come within par.(d) for the particular year. Farming activities in the year of claim would have to be of such a nature as would justify a reasonable expectation of profit in the future if undertaken by a competent farmer but if such a farmer had undertaken thise activities at the commencement of the period of years during which losses have arisen he could not reasonably have expected the activities to become profitable until after the end of the year of claim
Income Tax
Section 27, Finance Act, 1974
Origin: RLS Division
File ref:IT972003