Hi.I'm afraid that the law is pretty tough on this and there is no other legislation which overrides Sections 66 and 67 Income Tax Act 2007. If there was, those sections would be pointless. The capital allowances cannot be relieved sideways separately from the trading losses. I used to have this problem when I worked for a firm with many farming clients and the partner I worked for knew his farm tax inside out. We did cite repair and maintenance expenses as the expenses which pushed the farm into losses and that the underlying business was sound but the tax office would not accept our arguments and one even suggested the client spend more time farming and less time doing repairs and maintenance. That didn't go down well.
My former boss frequently advised farming clients to stagger major work so as to achieve a year of profitability which some took on board and some didn't. In your case, the tax office could argue that your client is fattening up the business for sale when he retires and appears not to be running it with a view to making trading profits so I wouldn't mention that in mitigation. Your only recourse is to apply for a tribunal hearing where your case can heard by an independent panel.I'm sorry I cannot be more positive. Let me know if you have any further questions.
7th April 2014
Thanks for the answer
My client farms 45 acres approx and has a suckler herd of 60 cattle producing quality beef animals.
Is there any other legislation in addition to S66 to establish whether the trade is commercial and with a view to realisation of profit.
Is it possible to go back and disallow expenditure for say 2009.10 which would show a profit before capital allowances.? Or is this entering anti avoidance territory.