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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Naghshineh v Commissioners for HM Revenue and Customs [2022] EWCA Civ 19 (13 January 2022) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2022/19.html Cite as: [2022] BTC 2, [2022] EWCA Civ 19, [2022] 1 WLR 3909, [2022] WLR 3909, [2022] STC 177 |
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ON APPEAL FROM
THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
TROWER J AND JUDGE THOMAS SCOTT
[2020] UKUT 0030 (TCC)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE BIRSS
and
LADY JUSTICE WHIPPLE
____________________
ARDESHIR NAGHSHINEH | Appellant |
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| - and - |
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| THE COMMISSIONERS FOR HM REVENUE AND CUSTOMS |
Respondent |
____________________
Marika Lemos and Hitesh Dhorajiwala (instructed by The Solicitor for HM Revenue and Customs) for the Respondent
Hearing dates: 15 and 16 December 2021
____________________
VERSION
OF APPROVED JUDGMENT
Crown Copyright ©
Lady Justice Whipple:
Introduction
Naghshineh
against the decision of the Upper Tribunal (Mr Justice Trower and Judge Thomas Scott). The UT allowed an appeal against the decision of the First-tier Tribunal (Judge Philip Gillett and Caroline de Albuquerque), allowing an appeal against the decision of
HMRC
to deny Mr
Naghshineh
"sideways relief" for losses deriving from his farming business at Salle Moor Hall in Norfolk (the "Farm") for the years 2007/08 to 2011/12. By this appeal, Mr
Naghshineh
seeks to restore the decision of the FTT and to secure sideways relief for some or all of those years. The total amount of tax at stake for those years is £587,140.21.
HMRC's
argument, upheld by the UT, is that on a proper construction of section 68(3)(b), the Appellant is not entitled to sideways relief for the years in question. The single overarching issue in this appeal is therefore one of construction of that provision.
HMRC
filed a Respondents' Notice submitting that the UT's decision should be upheld on further or different grounds arising out of the evidence which was before the FTT.
Naghshineh
was represented by David Southern QC and Denis Edwards who did not appear in the FTT or the UT below.
HMRC
were represented by Marika Lemos who did appear below in the UT (but not the FTT) and Hitesh Dhorajiwala who did not appear below. We are
very
grateful to all counsel and their respective legal teams for the assistance they have given us.
Facts
Naghshineh
realised that he could obtain premium prices for organic farm produce compared to conventional produce and he therefore decided to convert the Farm to organic production. He also decided that the Farm was unlikely to be economically
viable
without increasing its size substantially and so he planned to increase the Farm's size by purchasing other land. Further, he decided to work towards ways of direct selling to the public, which he thought would enable him to achieve significantly higher prices than conventional routes.
Naghshineh
acquired a further 221 acres of land and in 2000 he acquired a further 89 acres. In 2007 he acquired a further 25 acres of agricultural land as well as a 28-acre apple orchard. In the years with which this appeal is concerned, therefore, the Farm extended to 438 acres.
Naghshineh
made significant changes to the way in which the Farm was run. He operated on an organic basis until 2009/10, but the market for organic produce deteriorated in 2008/09 and at that time the Farm required additional investment to continue to operate in its current form and, because of the financial crisis, Mr
Naghshineh
was unable to access additional funds. He therefore took the decision to revert to farming on a conventional basis.
Naghshineh
has carried on
various
different agricultural and non-agricultural activities on the Farm, with the activities in question often changing from year to year. The agricultural activities fell into three main categories: (a) arable, comprising crop,
vegetable,
and fruit production; (b) livestock, comprising the rearing of cattle and sheep; and (c) egg production. Additional business
ventures
associated with the Farm were his direct delivery box scheme, a farm shop, renting out of property on his land, a micro-brewery and a mustard business.
Naghshineh
intended that the Farm should operate on a commercial basis and should realise profits.
Naghshineh's
purchase of the Farm fell in the tax year 1994/5, which was therefore the first tax period in issue, starting from 6 April 1994. It took 18 tax years for the Farm to come into profit which it did in 2012/13.
Legislation
"(1) Trade loss relief against general income for a loss made in a trade in a tax year is not available unless the trade is commercial.
(2) The trade is commercial if it is carried on throughout the basis period for the tax year–
(a) on a commercial basis, and
(b) with aview
to the realisation of profits of the trade.
(3) If at any time a trade is carried on so as to afford a reasonable expectation of profit, it is treated as carried on at that time with aview
to the realisation of profits.
(4) If the trade forms part of a larger undertaking, references to profits of the trade are to be read as references to profits of the undertaking as a whole.
(5) If there is a change in the basis period in the way in which the trade is carried on, the trade is treated as carried on throughout the basis period in the way in which it is carried on by the end of the basis period.
[…]"
v
Rothwell [1996] STC 450 Robert Walker J said:
"The distinction is between the serious trader who, whatever his shortcomings in skill, experience or capital, is seriously interested in profit, and the amateur or dilettante" (at p 461c-d).
v
HMRC
[2017] STC 874, Nugee J said:
"35. … That requirement is looking at the aim or purpose of the relevant person, which is (primarily at least) a subjective question, rather than whether profits could reasonably be expected, which is an objective question"
"(1) This section applies if a loss is made in a trade of farming or market gardening in a tax year ("the current tax year").
(2) Trade loss relief against general income is not available for the loss if a loss, calculated without regard to capital allowances, was made in the trade in each of the previous 5 tax years (see section 70)
(3) This section does not prevent relief for the loss from being given if–
(a) the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking,
(b) the farming or market gardening activities meet the reasonable expectation of profit test (see section 68), or
(c) the trade was started, or treated as started, at any time within the 5 tax years before the current tax year (see section 69 below, as well as section 17 of ITTOIA 2005)."
"(1) This section explains how the farming or market gardening activities ("the activities") meet the reasonable expectation of profit test for the purposes of section 67.
(2) The test is decided by reference to the expectations of a competent farmer or market gardener (a "competent person") carrying on the activities.
(3) The test is met if–
(a) a competent person carrying on the activities in the current tax year would reasonably expect future profits (see subsection (4)), but
(b) a competent person carrying on the activities at the beginning of the prior period of loss (see subsection (5)) could not reasonably have expected the activities to become profitable until after the end of the current tax year.
(4) In determining whether a competent person carrying on the activities in the current tax year would reasonably expect future profits regard must be had to–
(a) the nature of the whole of the activities, and
(b) the way in which the whole of the activities were carried on in the current tax year.
(5) "The prior period of loss" means–
(a) the 5 tax years before the current tax year, or
(b) if losses in the trade, calculated without regard to capital allowances, were also made in successive tax years before those 5 tax years (see section 70), the period comprising both the successive tax years and the 5 tax years."
The Issue
Naghshineh,
by his counsel, says that the words mean the farming or market gardening activities which were in fact being carried on at the beginning of the prior period of loss and up to the current tax year, and that the test relates to the reasonable competence of the farmer or market gardener who has carried on those activities since that date.
HMRC
say that the words mean the farming or market gardening activities in the current tax year, taking account of the nature of the whole of the activities and the way in which they were carried out in the current tax year, and the test is one of expectation of when those activities might reasonably be expected to come into profit.
v
IRC ex p Unilever plc [1996] STC 681 at 690.
HMRC
do not dispute the principle, at a high level of generality, but they dispute Mr
Naghshineh's
entitlement to sideways relief for the years in issue, because they say he fails limb (b) of the reasonable expectation of profits test in each of those years. The test requires evidence to show that if the activities in the current tax year had been carried on at the beginning of the prior period of loss (from 6 April 1994, in Mr
Naghshineh's
case), they could not reasonably have been expected to be profitable until after the end of the current tax year; but, they say, no finding to that effect was made by the FTT, in relation to any one of the years in dispute, and so the claim for sideways relief must fail.
First-tier Tribunal
Naghshineh
and from Mr William Waterfield, an expert in farming, particularly organic farming, and farm management. Mr Waterfield's evidence was not significantly challenged under cross examination. The FTT approached the limb (b) test in the following way (emphasis added):
"18. Importantly, the expression 'the prior period of loss' is defined in s68(5) and requires us to consider the reasonable expectations of the competent farmer as they would have been at the beginning of the period when the losses commenced."
"… Having established the business in 1995 the farm area increased with land purchase in 1998 and in 2000 when the business was fully established with 153 hectares being farmed. The conversion to organic production delayed the establishment of a stable business until December 2002 resulting in the first [saleable organic] harvest being 2003 and [the first] income accruing [from that harvest] in the year ending 2004.
In my opinion a competent operation running a simple system of production, with sales to stable wholesale markets, and economies of scale being employed, could reasonably expect to be making a profit from conventional crop production and livestock rearing within 3-5 years.
A more complex farming system such as organic farming with the establishment of a diverse portfolio of enterprises, combined with the development of short supply chains direct to end consumers and limited opportunities for economies of scale, where diversification and continual expansion are combined with retailing, a competent farmer could reasonably expect to be making a profit in 10 years.
Where markets become unstable through forces beyond the control of the business, which necessitate production realignment and enterprise simplification and re-organization, a competent farmer could reasonably expect to be making a profit within 3 years from enterprises after restructuring."
"35. He had said that starting in 1998, when the additional 220 acres were acquired, it would take two years to achieve the conversion to organic status and a further two years to obtain full organic certification. The first fully organic harvest from this land would then be in 2003, with the profit from that harvest accruing in 2004. It would then take until the end of 2012 before he would expect a profit to accrue from the farming activities as a whole. He also clarified that his use of the words "within 10 years" in his report should be taken to read that he would not expect profits until after the end of that period."
"39. We must therefore consider the thinking of the competent farmer as at 31 March 1995. We are required by the legislation to work on the basis that the competent farmer was planning to carry on the same activities as were carried on by MrNaghshineh
in the years under consideration. In summary these plans must therefore have included:
(1) The acquisition of more land in order to achieve the scale necessary for profitability,
(2) The conversion of all the land to organic status,
(3) Producing a wide range of farming produce, and
(4) Selling farm produce directly to the consumer.
40. Applying Mr Waterfield's timescales to these activities we consider it reasonable to assume that the competent farmer's timescales would have included:
(1) Finding and acquiring the necessary land; three to five years,
(2) Conversion of the land to organic status; four years,
(3) Producing a wide range of farming produce; four to ten years,
(4) Selling farm produce directly to the consumer; four to ten years, and
(5) Achieving profitability; ten years after the land had been converted to organic status.
41. This would mean that profits would not have been expected until after the end of 2012.
42. We therefore find that MrNaghshineh
did indeed fulfil the second test in all years up to and including 2012."
HMRC
appealed.
Upper Tribunal
"32. The parties suggested that paragraph [40] should be read as a finding that as at the beginning of the prior period of loss the competent farmer would not have forecast profits for at least 17 years. That figure results if one assumes that:
(1) The total minimum forecast period is three years for acquiring land, plus four years for conversion to organic status, plus ten further years for achieving profitability.
(2) Items (3) and (4) run concurrently with item (2).
(3) Where a range is specified, one takes the lower figure.
33. We agree that that is the most plausible interpretation of paragraph [40], and one which supports the conclusion reached by the FTT. We have therefore assumed in our decision that this is indeed how the FTT's decision should be interpreted. It is, however, unfortunate that both the parties and this Tribunal should have to unpick and deduce the essential reasoning in this way."
v
HMRC
[2017] UKUT 0001 (TCC), [2017] STC 2108 (which I will deal with at paragraphs 68-69 below), and described the drafting of section 68 as "dense and difficult". The UT concluded that section 68 should be construed in the following way:
"39. In our opinion, the test operates as follows. First, the activities actually carried on in each year of loss—in this appeal each of the five tax years from 2007/08 to 2011/12 inclusive—must be determined. Second, one must then assume that those activities were being carried on at the beginning of the loss period (discussed below but found by the FTT to be 31 March 1995). Having made that assumption, one must ask how long a competent farmer at 31 March 1995 would have expected it would take for those activities to become profitable. In answering that question, the competent farmer must "have regard to" the factors mentioned in section 68(4). Only if the competent farmer can say "it would have taken until after the end of the relevant loss year", and only if he could not reasonably have reached a contraryview,
is the test in section 68(3)(b) satisfied. While applying the test of expectation as at 1995 may seem harsh, we note that section 68(3) refers specifically not to a competent person at that time but to "a competent person carrying on the activities at the beginning of the prior period of loss" (our emphasis).
40. With this approach in mind, our conclusions in relation to the competing submissions of the parties are as follows. First, the question of whether it is right or wrong to take account of preparatory or planning steps in relation to the trade is the wrong question. The operative question is "what were the activities as actually carried on in a particular loss year?" If, for instance, by a particular loss year as a matter of fact insufficient land had been acquired to operate the activities in that year profitably, that would inform any assessment to be made under section 68(3)(b), and if as a matter of fact the contrary was the case, that would similarly inform any assessment. But that would be so not because of a principle that planning or preparatory steps are or are not relevant, but because of the activities in fact carried out in that year. Second, it is essential in applying the test not to adopt a general categorisation of the activity carried out over a period of several years, such as "organic farming", "stud farming" or "conventional farming", but to consider the activities actually carried out in each tax year of loss. Not only may the activities change radically in nature (as they did in this appeal when the farm was eventually converted from mixed-use organic to conventional farming), they may well change more gradually. If, for instance, one takesHMRC's
practice of generally accepting that stud farming takes 11 years to become profitable from the start of trading, then the answer to the question posited by section 68(3)(b) is likely to differ if the loss year occurs 10 years after the trade begins rather than 1 year after. Put another way, the test is dynamic and not static in nature."
"41. … The legislative code in this area seeks to reconcile a number of objectives, including a 'longer period of grace' than 5 years for sideways loss relief in respect of farming activities which by their nature or structure can reasonably be expected to take longer than normal to come to profit".
HMRC's
appeal and denied sideways relief to Mr
Naghshineh
for the years in dispute:
"44. According to the expert evidence on which the FTT based its decision, the four-year process of converting the land to organic status by 2002 would have led to the first fully organic harvest in 2003, with profit from the harvest in 2004. It would then take at least 10 years following conversion to organic status for theventure
to become profitable: [34], [35], [40] of the decision. On the basis of these facts, by 2007/08 the activities actually carried on in that year were (mixed-use) organic farming, the process of conversion having been completed some years previously. So, if the competent farmer had been assumed to be carrying on those activities in 1995, he would reasonably have expected them to become profitable (accepting for this purpose the expert evidence) by the early 2000s, being 10 years after a conversion to organic status which had occurred some years previously. Even if the competent farmer could reasonably have expected the profitability not to arise until 10 years after 1995, that would still have been before the first period of loss under appeal."
The Matters for Determination
i) What is the proper construction of the section 68(3)(b)? Within that overarching issue, there are a number of sub-issues:
a) Is the sub-heading to sections 66-70 which refers to "hobby" farmers relevant to construction?
b) How should section 68(3)(b) be construed, based on its language, context and statutory purpose?
c) What are the circumstances in which reference to the predecessor legislation may be made and do those circumstances exist here?
d) If reference is permitted to the predecessor legislation, what, if anything, does that reveal?
e) What does previous tribunal authority on the issue of construction of section 68(3)(b) show?
HMRC
in their Respondents' Notice.
Construction of Section 68(3)(b)
The "hobby farmers" sub-heading
Naghshineh's
decisions in relation to the farming business lacked commerciality and in some respects he was indifferent to the losses incurred.
value
of which he has improved by liberal expenditure, the amusement that he derives from indulgence in his hobby, the attraction of a 'hedge' against inflation" (see [489]). The Royal Commission did not consider there was a particular problem with hobby farmers but recommended a small amendment to the existing tax code to make it more difficult for abuses to be maintained (by strengthening the term "husbandry" as it then appeared in the tax legislation by defining it as "carried on on a commercial basis and with a
view
to the realisation of profits" - see [494]).
view
is that its inclusion in the heading is merely indicative of one type of farmer who would fall within these provisions. That interpretation makes sense of the following sections which are precise, and where key terms (such as "farming and market gardening activities") are defined. A similar conclusion was reached in Wannell, in relation to section 170(1) of the Income and Corporation Taxes Act 1970 (now section 66(1) and (2) ITA 2007), where Robert Walker J said: "that section was no doubt primarily aimed at hobby farming, but if that was intended to be its only aim, Parliament would have had a much easier and clearer means of achieving its aim …".
Naghshineh
was not a "hobby farmer", applying the Royal Commission's definition. The FTT made a finding that Mr
Naghshineh
intended that the Farm should operate on a commercial basis and should realise profits (at [9(17)]). I agree that
HMRC
is not entitled to go behind that finding by the FTT.
Language, Context and Purpose
v
Mawson (Inspector of Taxes) [2005] 1 AC 684 at [28] and [32].
view
of a competent farmer or market gardener (section 68(2)).
Naghshineh's
case, that would mean the farming activities undertaken from January 1995, before further land was purchased and before the conversion to organic was undertaken. There are obvious difficulties with fixing the activities at this point: it would mean that subsequent changes in the farming activities could not be taken into account. So, for example, in this case, Mr
Naghshineh's
entitlement to sideways relief would be forever more measured by whether and when his first-year activities were likely to be profitable. But Mr Southern does not apply the test quite so literally. He says that limb (b) operates as a prospective test. The competent person is required to look forward from the first year of the prior period of loss and predict, on the basis of the activities then carried on, whether those activities, as they might develop, would be unlikely to be profitable until a time after the current year (this is the formulation in the Appellant's skeleton at [101]). Mr Southern says that the application of this test is a matter of evidence, and that the point to which that evidence should go, in any given case, is this (as put in oral submissions): "how might this business undertake changes in the forthcoming years to become profitable, and what would be the timescale for such changes before they become profitable, in relation to all the alternatives?" So, he says, the early years when Mr
Naghshineh
built up the farm to the size it is today, and invested in the conversion to organic status, can be taken into account, and as long as they are within the bounds of what a competent person would have done, they meet the limb (b) test. Thus, he argues, Mr Waterfield's evidence that Mr
Naghshineh
reasonably undertook
various
changes which were predictable at the outset and reasonably took 17 years to bring this business into profit, answers the limb (b) test in Mr
Naghshineh's
favour. He argues that
HMRC's
alternative analysis is artificial and unworkable; and to the extent that it is built on a statutory hypothesis, it stretches the statute too far, citing Fowler
v
R&C Commissioners [2020] STC 1476.
view
is that Ms Lemos' construction of section 68(3)(b) is right, as the UT held. It makes sense of the statutory purpose which can be drawn from the language and context of the provisions themselves (and abiding by the principle in R
v
Barnet LBC, ex p Shah [1982] 2 AC 302 on which Mr Southern relies, not to impose my own
view
of the policy but rather to adopt a purposive interpretation found in the statute). The purpose of section 68(3)(a) and (b), read together, is to permit a relaxation of the five-year rule where farming or market-gardening activities are expected reasonably to be profitable, but to cap that relaxation at the number of years which it would reasonably take for the activities (the same activities as in limb (a)) to come to profit. The words "activities" as they are used in limb (a) and limb (b) mean the same thing, namely the farming or market gardening activities as defined at section 68(1), carried out in the current year pursuant to section 68(3)(a), and having regard to the nature of the whole of the activities and the way in which they are carried out in the current tax year pursuant to section 68(4). Limb (b) complements and refines limb (a) (connected by the "but" between them) and operates to impose a time limit on the relaxation. The purpose of limb (b) is to impose a "long-stop" date beyond which relief is not available.
Predecessor legislation
v
HMRC
[2013] UKUT 639 (TC), [2014] STC 1114 Sales J (as he then was) considered the approach to construction of a consolidating statute such as ITA 2007:
"96. … An important part of the objective of a consolidating statute or a project like the Tax Law Rewrite Project is to gather disparate provisions into a single, easily accessible code. That objective would be undermined if, in order to interpret the consolidating legislation, there was a constant need to refer back to the previous disparate provisions and construe them. … However, where, after undertaking such an exercise, a provision which falls to be applied is found to be ambiguous, a subordinate presumption comes into play, namely that it is presumed that there was no intention to change the meaning of the provision which has been repeated in the same language in the consolidated code. In such circumstances, it may be relevant to try to determine the meaning of the relevant provision by looking to see what it meant when it was previously enacted: see [Farrellv
Alexander][1977] AC 59 at 73B (Lord Wilberforce), 84D-H (Lord Simon of Glaisdale) and 97B (Lord Edmund-Davies)."
v
HMRC
[2019] 1 WLR 2745 at [9]. The parties agree that it represents the approach this Court should take to the issue now raised: it is necessary to identify an ambiguity before the earlier legislation can be considered.
"(3) [This section] shall not restrict relief for any loss or for any capital allowance, [in any case] —
(a) [where] the whole of the farming or market gardening activities in the year next following the prior five years are of such a nature, and carried on in such a way, as would have justified a reasonable expectation of the realisation of profits in the future if they had been undertaken by a competent farmer or market gardener, but
(b) [where], if that farmer or market gardener had undertaken those activities at the beginning of the prior period of loss, [that farmer or market gardener] could not reasonably have expected the activities to become profitable until after the end of the year next following the prior period of loss."
view
I had already reached in favour of
HMRC's
construction of the statute.
view
of the meaning of the predecessor legislation accords not only with the UT in this case, but also, as I am about to come onto, the UT in Scambler. The UT in both cases had regard to the predecessor legislation and considered it to be conclusive of any doubt they had entertained.
Previous Tribunal Cases
"Looking at the activities in [the current year], and taking account of the nature of the activities and the way they are carried on, I would reasonably have expected them to become profitable at some stage, but if you had asked me [at the beginning of the prior period of loss] to look at those [current year activities] in the same way, I could not reasonably have expected them to become profitable until after the end of [the current year]."
v
HMRC
[2015] UKFTT 0089 (TC), arrived at the same conclusion on the meaning of the provision as I have done, and as did the UT in this case and in Scambler, leading to the outcome in that case that sideways relief was denied for the year in question. One feature of that case was the FTT's recognition that farming involves occupation of land. This finds a statutory echo in section 996 which defines farming and market gardening by reference to occupation of the land (see paragraph 23 above).
v
HMRC
[2015] UKFTT 0532 (TC) rejected
HMRC's
submissions that "activities" referred to activities in the year of claim, and instead held that the word meant the trade of farming in respect of which the losses were claimed. It nonetheless went on to dismiss the appeal on the basis that at the beginning of the prior period of loss in 2000 the competent farmer would have expected profits before 2009/10 or 2010/11, the years of claim. With respect, it seems to me that this disposal was correct, even if the reasoning was different from the route I have taken through the statute.
v
HMRC
[2014] UKFTT 940 (TC). The FTT said at [49] (as obiter dicta given that the FTT had already determined the appeal on different grounds) that the word "activities" meant the activities that the actual farmer was conducting at the start of the period of losses and that
HMRC's
interpretation produced an incoherent result. It labelled as "extraordinarily far-fetched"
HMRC's
concern that the alternative interpretation could lead to abuse by hobby farmers changing farming activities every few years so that the relief became open-ended (see [51]). There are two points to make here. First, in their analysis of the statutory wording, the FTT said in terms that "it is not as if paragraph (b) referred to "those activities", which would clearly have been a reference back to the activities referred to in paragraph (a)…" I
venture
that if that Tribunal had been referred to the predecessor legislation which did contain the words "those activities" that they would have come to a different (and correct) conclusion on the law. Secondly, the logical consequence of the FTT's construction of section 68(3)(b) is that sideways relief could become open-ended, because the test could be satisfied indefinitely; it is not right to suppose that relief would be blocked by the commerciality test in section 66 or any other provision in the legislation; there would be the possibility of abuse.
view
that I have arrived at on the meaning of the statute, in the UT decision in this case, as well as in the earlier case of Scambler. The one FTT decision which clearly adopted the approach advanced by Mr Southern in this appeal (French) would probably have gone the other way if that tribunal had been shown the predecessor legislation.
Conclusion on Statutory Construction
Disposal on the Facts
various
steps that were built into that timeframe, including the purchase of land and its conversion to organic conditions.
various
strategies adopted by Mr
Naghshineh
over time. That is to test the competence of Mr
Naghshineh
as a farmer, which is not what limb (b) does. Mr Waterfield should have been asked to confirm whether the current year activities, taking account of the nature and the way they were carried on in the current year, (a) would have been expected to be profitable at some stage; and if so (b) if they had been carried on at 6 April 1994, they could not reasonably have been expected to become profitable until after the end of the current year. The FTT, and in turn the UT, did not have this evidence before them and it follows that the appeal should have been dismissed for lack of evidence to satisfy the statutory test. This is the central submission advanced in
HMRC's
Respondents' Notice.
Naghshineh
reasonably endured losses for 17 years before becoming profitable. He argues that the UT was not permitted to substitute 10 years, or to conclude that for some years there was no evidence at all as to the reasonable timeframe in which to expect profit. The years in question are wholly or mainly within the 17-year timeframe envisaged and Mr
Naghshineh
should have relief for those years.
Naghshineh's
claims for sideways relief on the basis of a lack of relevant findings by the FTT (and in turn because of a lack of relevant evidence adduced by the Appellant), does not matter on the facts of this appeal, because either way Mr
Naghshineh's
claims were doomed to failure. The matters raised in the Respondents' Notice do not need to be determined.
Conclusion
vary
in each case and will depend on evidence, that evidence focussing on the amount of time reasonably expected for those activities, i.e. the ones which are being carried on in the current year, to come to profit, taking their hypothetical start date at the beginning of the prior period of loss.
Naghshineh was not entitled to sideways relief for any of the five years of claimed losses.
Lord Justice Birss:
Lord Justice Green: