Budget 2008

Agricultural Related Income Tax Matters

Averaging farm profits

• Only applicable for partnerships an sole traders.
• Each partner is treated individually.
• Averaging is available where the adjusted profits after capital allowances for 2 consecutive years differ by more than 25%.
• Losses count as nil profit for this purpose.

Herd basis

• Election is available for all types of production herds.
• Once made the election is irrevocable.
  
• A new election is required in certain circumstances (eg change of partner).
  
• Net replacement cost is allowable against profit.
  
• Profits on disposal of more than 20%of herd are tax free if not replaced within 5 years.
  
• Can also apply to shares in production animals.

Hobby farming

• Loss relief will normally be is allowed where:
  
  • the activity is undertaken on a non-commercial basis; or
    
  • there are losses before capital allowances for 5 consecutiveyears.

One trade

• Farming, wherever it is carried on in the UK, is deemed to be one trade regardless of how many farms are operated by the same
  individual, trust or company.

Single payment

• Is taxed as income.
• Recognition for tax purposes depends on the choice of 10 month period and will be assessed on a calendar year basis.