BIM73125 - Farmers' averaging: transition to SA

The change described in BIM73120 means that, for trades which commenced before 6 April 1994, the profits of 1996-97 are measured differently for averaging purposes depending on whether they are being averaged with the preceding year or the following year. Where successive averaging claims are made, first for 1995-96 and 1996-97, then for 1996-97 and 1997-98:

• the 1996-97 profits to be used in the first claim are the profits before capital allowances,
• the 1996-97 profits to be used in the second claim are the profits after the averaging with 1995-96 and after the deduction or addition of capital allowances and balancing charges.

Also see BIM73190 for the effect on partnerships.