On 3 September 2026 the First-tier Tribunal released Jody Scheckter v HMRC ([2026] UKFTT 1280 (TC)). The appeal failed. Sideways loss relief claimed against other income — and, for one year, against capital gains — was denied on the farming losses of Laverstoke Park Produce LLP.
If you sit as PE-facing CFO, own OMB tax packs, clear group loss claims, or sign SA positions where an LLP/company stack carries multi-year losses against high personal income, this is not a lifestyle-farm footnote. It is a live map of how ITA 2007 ss 66 and 67 still separate subjective profit motive from objective commercial basis — and how “one business in the founder’s head” fails when the statute looks at the legal entities.
What was actually claimed
Scheckter, former F1 world champion and later founder of FATS Inc., built an organic farming and food enterprise at Laverstoke Park. The LLP (99% interest) ran farming, livestock and dairy processing. A connected company — later Laverstoke Park Farms Limited — handled processing and retail. Together: the “Business”.
Nearly £55m of capital went into the LLP over roughly a decade. Losses after capital allowances in the appeal years were heavy: ~£2.77m / £7.19m / £3.35m. Sideways claims totalled about £1.80m, £1.61m plus ~£201k against gains, and £182k. HMRC enquiries opened 2010–12; individual closure notices in 2019 denied the claims (tax in play roughly £717k, £675k plus £184k CGT, and £65k). Hearing June–July 2026 before Judges Tony Beare and Jane Shillaker; judgment 3 September 2026. Counsel: Ben Elliott (Eversheds) for the appellant; Aparna Nathan KC and Matthew Bignell for HMRC.
The statutory fork every CFO must keep straight
Two restrictions matter. They are not the same test.
Section 66 ITA 2007 — loss relief against general income needs a commercial trade: on a commercial basis and with a view to profits throughout the basis period. If the trade is part of a larger undertaking, profits means profits of the undertaking (s66(4)). HMRC still frames commerciality as catching extreme cases — BIM85615, BIM85705. The case language remains Wannell v Rothwell: serious trader versus amateur.
Section 67 ITA 2007 — the farming “hobby” rule. Sideways relief can fail where losses (without capital allowances) arose in each of the prior five years, subject to limited exceptions. One is farming carried on as part of, and ancillary to, a larger trading undertaking (s67(3)(a)). See BIM85601 and HS224.
UK farming is a trade whether or not commercial (ITTOIA 2005 s9). That does not unlock sideways relief. It only puts you into s66/s67.
How the FTT decided the six live issues
The tribunal held:
1. Single trade of farming — s67(2) engaged unless the ancillary exclusion applied.
2. Part of a larger trading undertaking with the Company — multi-entity undertaking accepted.
3. Not ancillary — s67(3)(a) failed; appeal failed on that ground alone.
4. Not on a commercial basis for s66(2)(a) — tested on the LLP alone, not the combined Business.
5. Part of a larger undertaking for s66(4) and carried on with a view to profits of that undertaking.
6. View to profits of the trade itself — subjective profit motive survived.
Profit motive won. Commercial basis lost. Ancillary lost. Relief lost.
Why “ancillary” failed
“Ancillary” is undefined. Ordinary meaning won: subordinate, subsidiary — support, not predominance. Farming was not the side-show. Headcount and activity mix put farming at the core of the LLP. Being part of a larger undertaking is not enough. Being ancillary to it is the extra step. That step failed; s67(2) stayed live.
Why commercial basis failed while profit motive survived
Commercial basis was tested on the LLP alone, not the combined Business. The tribunal accepted commercial features in the Business as a whole and a genuine subjective profit motive (plus an altruistic health-food mission). Still not enough.
The decisive failure was structural: the LLP made its most valuable asset — the brand — available to the Company without charge. Free use of the crown jewel is not commercial when the LLP is viewed in isolation. Other TP charges and hypothetical advice about brand royalties did not cure the missing charge.
“We run it as one business” is a management story. Section 66 still asks whether this trade, in this vehicle, is commercial. Free brand, soft intra-group support, or founder indifference to entity boundaries is where HMRC plants the flag. Bloomberg Tax’s 8 September note put the relief at £1.4m+; the judgment is the operating manual.
Why CFOs outside farming still need this
1. Food PE and diversified agri stacks. Land/LLP farming, processing Co, brand, shop, hospitality — common structures. The FTT will accept a multi-entity larger undertaking where management and asset flows integrate. It will not treat core farming as “ancillary”. Stress-test predominance with headcount, margin and capital, not founder intent.
2. Any LLP sideways claim. Section 66 is not farm-only. Long loss runways, mission overlays and soft intra-group charging raise the same Wannell question — BIM85705, BIM85710.
3. Founder entity hygiene. Passion plus capital plus profit hope still failed when the LLP was unpaid for brand use. Rebuild the charge map: brand licences, facility leases, labour, IP, distribution margins.
4. Evidence over reconstruction. Enquiries 2010–12, closure 2019, hearing 2026 — a fifteen-year arc. Contemporaneous board packs and TP files beat later witness polish. ICAEW/CIOT sign-offs on multi-year farming losses are high-scrutiny work — CIOT, ICAEW Tax, BIM85601.
5. PE memos. Where founders hold LLP interests beside salary, carry or exit gains, model the s66/s67 failure case, not only the base case.
Practical lock-list
- Map the trade. Farming under ITTOIA s9, or a wider trade with farming inside? Wrong box changes which restriction applies.
- Run s67 five-year maths without capital allowances. If you need s67(3)(a), prove ancillary with evidence that survives headcount and capital tests.
- Split commercial basis from profit view. Motive can pass while commercial basis fails. Pricing and cost recovery beat conviction letters.
- Charge brand and facilities. Free IP between LLP and Co was fatal on the LLP alone. Licence and lease at supportable values; keep the advice file.
- Do not use “larger undertaking” to fix commercial basis. It helped profit view under s66(4). It did not rewrite commercial basis, which stayed on the LLP.
- Write the narrative in the loss years. Board packs, bank cases and TP policies beat decade-later reconstruction.
- Track partnership and individual closures separately. The LLP appeals were not yet at the FTT.
- Watch the 56-day permission window under FTT Rule 39; commercial-basis reasoning is the piece most likely to travel.
Primary sources: ITA 2007 Part 4, BIM85601, the judgment, FTT Tax search, UT TCC search.
Bottom line
Scheckter accepted farming, a multi-entity larger undertaking, and genuine profit motive. It refused ancillary, refused commercial basis on the LLP, and dismissed the appeal.
Sideways relief is earned by how the trade runs inside the claiming vehicle — pricing, brand, entity boundaries, predominance — not by capital committed, mission quality, or “all one business” management speak. Lock the charge map and the loss-relief opinion before the next claim.
If you have an LLP/Co food, land or founder-adjacent stack with open loss years, pressure-test s66 and s67 against Scheckter this quarter. The statute has not softened.