BIM73140 - Farmers' averaging: successive claims
A farmer who has made a claim to average farm profits for, say,
2000-01 and 2001-02 may then claim to average the profits for
2001-02 and 2002-03 and so on. Where such overlapping claims are
made, the first year of the second pair is to be based on the
assessment determined by averaging or by marginal adjustment for
the second year of the first pair. But once a claim has been made
and settled ICTA88/S96 (4)(a) prohibits the making of claims for
earlier years.
Example 1
Profits before averaging are as follows:
| Year | £ |
| 2000-01 | 40,000 |
| 2001-02 | 24,000 |
| 2002-03 | 48,000 |
A claim is made for averaging 2000-01 and 2001-02 and
subsequently a claim is made for 2001-02 and 2002-03.
The computations are as follows:
| Year | Profit before averaging | Profit after averaging | Final assessment | |
| First claim | Second claim | |||
| £ | £ | £ | £ | £ |
| 2000-01 | 40,000 | 32,000 | 40,000 | |
| 2001-02 | 24,000 | 32,000 | 40,000 | 32,000 (-2000-01 tax adjustment) |
| 2002-03 | 48,000 | 40,000 | 40,000 (+2001-02 tax adjustment) | |
Example 2
Profits before averaging are as follows:
| 2000-01 | £40,000 |
| 2001-02 | £28,500 |
| 2002-03 | £48,000 |
Again, a claim is made for averaging 2000-01 and 2001-02 and
subsequently a claim is made for 2001-02 and 2002-03.
The computations are as follows:
| Year | Profit before averaging | Profit after averaging | Final assessment | |
| First claim | Second claim | |||
| £ | £ | £ | £ | |
| 2000-01 | 40,000 | 35,500* | 40,000 | |
| 2001-02 | 28,500 | 33,000* | 40,500 | 33,000 (-2000-01 tax adjustment) |
| 2002-03 | 48,000 | 40,500 | 40,500 (+2001-02 tax adjustment) | |
* Marginal adjustment of ( 3 x 11,500 ) - (3/4 x 40,000 ) =
4,500.
See
BIM73145 for an example demonstrating
how relief is computed within SA.
