Finance Act, 1974

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Restriction of relief for losses in farming or market gardening.

27.—(1) In this section—

“basis year”, in relation to any capital allowance, shall be construed in accordance with section 317 (2) of the Income Tax Act, 1967 ;

“capital allowance” has the same meaning as in section 317 of the Income Tax Act, 1967 ;

“prior three years” in relation to a loss incurred in a year of assessment, means the last three years of assessment before that year;

“prior period of loss” means the prior three years, or, if losses were incurred in successive years of assessment amounting in all to a period longer than three years (and ending when the prior three years end), that longer period;

“market gardening” has the same meaning as in section 54 of the Income Tax Act, 1967 .

(2) (a) Any loss (including any amount in respect of allowances which, by virtue of section 318 of the Income Tax Act, 1967 , is to be treated as a loss) incurred in a trade of farming or market gardening shall not be available for relief under section 307 or 308 of that Act unless it is shown that, for the year of assessment in which the loss is claimed to have been incurred, the trade was being carried on on a commercial basis and with a view to the realisation of profits in the trade.

(b) Without prejudice to paragraph (a), any loss (including any amount in respect of allowances which by virtue of section 318 of the Income Tax Act, 1967 , is to be treated as a loss) incurred in any year of assessment in a trade of farming or market gardening shall not be available for relief under section 307 or 308 of the Income Tax Act, 1967 , if in each of the prior three years a loss was incurred in carrying on that trade.

(c) For the purposes of this section, the fact that a trade of farming or market gardening was being carried on at any time so as to afford a reasonable expectation of profit shall be conclusive evidence that it was then being carried on with a view to the realisation of profits.

(d) This subsection shall not restrict relief for any loss or any capital allowance if it is shown by the claimant that the whole of his farming or market gardening activities in the year next following the prior three 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 that, if that farmer or market gardener had undertaken those activities at the beginning of the prior period of loss, he could not reasonably have expected the activities to become profitable until after the end of the year next following the prior period of loss.

(e) This subsection shall not restrict relief where the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking.

(3) In ascertaining for the purposes of this section whether a loss was incurred in any year the rules applicable to Case I of Schedule D shall be applied.

(4) Where a trade of farming or market gardening is or falls to be treated as being carried on for a part only of a year of assessment by reason of its being set up and commenced, or discontinued, or both, in that year, subsection (2) shall have effect in relation to that trade as regards that part of that year.

(5) Subsection (2) shall not restrict relief for any loss or capital allowance if the trade was set up and commenced within the prior three years, and, for the purposes of this subsection, a trade shall be treated as discontinued, and a new trade set up, in any event which under any of the provisions of the Income Tax Acts is to be treated as equivalent to the permanent discontinuance or setting up of a trade.

(6) Where at any time there has been a change in the persons engaged in carrying on a trade of farming or market gardening, this section shall, notwithstanding subsection (5), apply to any person who was engaged in carrying on the trade immediately before and immediately after the change as if the trade were the same before and after without any discontinuance, and as if a person and another person with whom he is connected were the same person. In this subsection any question as to whether persons are connected shall be determined in accordance with the provisions of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 .

(7) Any loss to which this section applies shall not be taken into account in computing profits or losses for the purposes of section 53 of the Finance Act, 1920 .