BIM55155 - Farming: receipts and expenses: grants and subsidies: tax treatment: general principles

The principles governing the tax treatment of grants and subsidies, together with examples from case law, are set out at BIM40450 onwards to which reference should be made in any case of doubt or difficulty. The main general principle is the distinction between capital and revenue and the main determining factor is the purpose for which the grant is paid. Usually there is little doubt in the case of farming grants (but see BIM55165). In cases of doubt you will need to examine the formal documentation.

Decided cases on farming grants include:

• Higgs v Wrightson [1944] 26TC73 (ploughing grant held to be a trading receipt).
• Watson v Samson Brothers [1959] 38TC346 (payments for rehabilitation of flood- damaged land held to be capital receipts).
• White v G & M Davies [1979] 52TC597, and CIR v Biggar [1982] 56TC254 (premiums payable under scheme for conversion of dairy herds to beef production held to be trading receipts).