Go In Prepared
In a recent tax case, HMRC defeated a claim for loss relief by a football club on the grounds that there was no expectation of profit.
This is a fair enough principle. If you are not going for profit, then you can’t profit from the resulting loss.
Motive and intention are however, difficult to assess.
In this particular case, HMRC saw no chance of profit.
The football club had to admit that profit had not resulted, but they maintained that they always planned to achieve it. If you plan for it and fail, you are okay. If your plans showed it was never possible, you can’t have the loss relief.
The Tribunal agreed with HMRC because the football club could present no evidence to back up their claims that they thought they would make a profit and that they strove to achieve it.
Now, if they had gone to the Tribunal with a contemporary business plan, budgets or forecasts, they may have been able to present a case.
Always go in prepared.