Taxes Consolidation Act 1997 section 662

Income tax: restriction of relief for losses in farming or market gardening

Section 662 restricts relief under section 381 for losses incurred in a trade of farming or market gardening, primarily targeting "hobby farmers" who are not genuinely trading with a view to profit.

• A farming or market gardening loss may only be relieved under section 381 if the trade was carried on commercially and with a view to profit; separately, relief is denied if losses arose in each of the three preceding tax years.
• Relief may still be given where a competent farmer could not reasonably have expected the activity to become profitable by the end of the loss year, or where the farm is ancillary to a larger trading undertaking.
• The three-year restriction does not apply where the trade was set up and commenced within the three years preceding the year of claim.
• As an anti-avoidance measure, where a farming trade changes hands between connected persons, the successor is treated as having carried on the same trade, preventing a fresh three-year run.