At the March 2015 Budget, the Chancellor announced an extension to the period over which self-employed farmers could average their profits for income tax purposes from 2 years to 5 years and a consultation would take place this summer. This consultation has now closed.
HMRC initial suggestions look complex and expensive to deal with; the proposals have a number of limitations and constant choice involves constant cost in looking at options. One suggestion is opting into rolling averaging for a five year term in advance, which would involve something of a blind bet.
Greaves West & Ayre has been part of an industry group who at the recent professional bodies’ consultation recommended a simplified version which should still benefit the industry. The group has suggested retaining a streamlined form of two year averaging to allow immediate relief for fluctuating profits, with the ability to re-average over 5 years every 5 years with the benefit of hindsight.
HMRC are now considering this and other responses and will plan to publish their response and draft legislation (intending the new rules to be available from April 2016) at the time of the autumn statement.
Andrew Ayre is a partner at Greaves West & Ayre and Chair of the ICAEW Farm Special Interest Group Tax & Technical Committee.