BIM55320 - Farming quotas: quota leasing

Most types of quota can be leased by one farmer to another for a fixed period, usually a year. In particular, there is a very active market in the leasing of milk quota. The essential difference between leasing and sale is the temporary nature of the leasing arrangement with the quota reverting back to the original owner at the end of the agreement. This leads to a difference in the tax treatment. Payments for quota leasing are allowable expenses in the farmer's accounts. Similarly, receipts from the leasing of quota which is temporarily surplus to the requirements of a particular activity carried on by a farmer may be regarded as part of the farming income within Case I of Schedule D. But income from leasing of quota which is not required because the activity to which the quota relates has ceased or substantially reduced should be dealt with under Case VI of Schedule D.

QUOTA LEASED OUT BY NON-FARMERS

Where quota is leased out by a non-farmer (including an ex-farmer who has retained quota), the income is chargeable under Case VI of Schedule D. It is highly unlikely that there would be evidence to justify Case I treatment.