BIM55185 - Farming: spreading relief following compulsory slaughter computation

Relief under the second sub-paragraph of BIM55180 is to be given, at the request of the taxpayer, on all compensation moneys received by a farmer (or farming company) for animals compulsorily slaughtered other than animals in respect of which a herd basis election has been or could be made by virtue of ICTA88/SCH5/PARA6 or ITTOIA/Part 2/Chapter 8 (whether or not such an election is in fact made). The scope of the relief is, in practice, therefore normally restricted to compensation receipts in respect of the slaughter of -

• immature animals (followers) in a production herd
• mature animals which do not constitute the whole, or a substantial part, of a production herd
• animals kept for sale or slaughter, for example store cattle
• flying flocks or herds (see seventh bullet in BIM55570).

See BIM55180 for the extended terms of ESC B11 in relation to the 2000 - 2001 Foot and Mouth outbreak.

If a farmer does not wish to have the relief, all compensation received for the slaughter of trading stock should be treated in the normal course as a trading receipt of the accounts year in which the slaughter takes place.

In computing the relief, the `profit on compensation' should be arrived at by deducting from the compensation received for each animal -

• born or bought in a year prior to the year of slaughter, the amount at which the animal was valued at the beginning of the accounting period in which the slaughter took place
• born in the year of slaughter, 75% of the compensation
• bought in the year of slaughter, the purchase price.

If, owing to inadequate records, particulars of animals born or purchased in the year of slaughter are not available, a reasonable estimate may, for the purpose of computing the relief, be accepted.

EXAMPLE

John, a dairy farmer, who has not previously elected for the herd basis, makes up his accounts to 31 March. In November 2000 all his cattle are slaughtered. The livestock figures shown in his accounts for the year to 31 March 2001 are as follows:-

John makes a herd basis election under ICTA88/SCH5/PARA6. The profit of £24,000 (£72,000 - £48,000) on the mature animals is therefore excluded from assessment. The balance of the compensation receipts relating to the immature animals is eligible for spreading relief.

The `profit on compensation' is computed as follows:-

The taxable profit for 2000-01 is reduced by £12,900 and the taxable profits for 2001-02, 2002-03 and 2003-04 are increased by £4,300 a year.

In this example, if John had not made a late herd basis election the relaxation of ESC B11 for the year 2000 outbreak of Foot and Mouth the ‘profit on compensation’ is computed as follows:-

The taxable profit for 2000-2001 is reduced by £36,900 and the taxable profits for 2001-02, 2002-03 and 2003-04 are increased by £12,300 a year.