A policy paper released by the UK government on 9 December confirms that legislation is to be included in the Finance Bill 2016 to amend the provisions on farmers’ averaging of profits. The new provisions will allow an individual engaging in a qualifying trade of farming, market gardening or intensive rearing of livestock or fish to average the profits for income tax purposes over five years instead of two years as was previously the case. The provision will apply to averaging claims made for 2016/17 and subsequent tax years. There will still be an option to average profits over a two year period.
The rules for farmers and for creative artists who can benefit from two-year averaging will be simplified by removing the marginal relief provisions. Full averaging relief will be available where the profits of one of the two years are 75% or less of the profits of the other year.
