BIM73150 - Farmers' averaging: amendments to profits: reasons other than averaging: averaging claim in place
Where, after an averaging claim has been made for any two years of assessment, the profits for both or either of the years are amended for any reason other than the making of an averaging claim, the existing claim is to be unscrambled and ignored. This may occur, for example:
- where an error or mistake claim is accepted,
- where the Inspector discovers that additional trading profits are to be assessed.
However, a further claim for averaging may then be made in respect of the two years which have been unscrambled. The time limit for making such a further claim is:
- for pairs of years up to 1995-96 and 1996-97, the end of the year of assessment following that in which the adjustment giving rise to the unscrambling was made, and
- for 1996-97 and 1997-98 and subsequent pairs of years, 31 January next following the end of the year of assessment in which the adjustment giving rise to the unscrambling was made.
Where, as a consequence of this further claim, scope for
averaging newly occurs for subsequent years, a further claim for
those years may be admitted under TMA70/S43 (2). Consequential
adjustments for years earlier than the years covered by the further
claim are prevented by ICTA88/S96 (4)(a).
The above points are illustrated in the example below.
Example
Farm profits and assessments are originally as follows:
| Year | Farm profits for the year of assessment | Original Section 96 claims | Assess-ments | Tax adj. | |||
| £ | £ | £ | £ | £ | £ | ||
| 1998-99 | 35,000 | )52,500 | 35,000 | ||||
| 1999-00 | 70,000 | )52,500 | No claim competent | 52,500 | + 98-99 tax adj. | ||
| 2000-01 | 40,000 | No claim competent | 40,000 | ||||
| 2001-02 | 32,000 | )46,000 | )32,000 | ||||
| 2002-03 | 60,000 | )46,000 | )46,000 | + 01-02 tax adj. | |||
Following an investigation, a further assessment on £10,000 is made for 1998-99. The Section 96 position then becomes as follows:
| Farm profits for the year of assessment | Further claims for averaging | Assess-ments | Tax adj. | ||||
| Under ICTA88/S96 (5)(c) | Under TMA70/S43 (2) | Under TMA70/S43 (2) | Under ICTA88/S96 (5)(c) | ||||
| Year | £ | £ | £ | £ | £ | £ | £ |
| 1998-99 | 45,000 | )57,500 | 45,000 | ||||
| 1999-00 | 70,000 | )57,500 | )48,750 | 57,500 | + 98-99 tax adj. | ||
| 2000-01 | 40,000 | )48,750 | )40,375 | 48,750 | - 99-00 tax adj. | ||
| 2001-02 | 32,000 | )40,375 | )50,187 | 40,375 | - 00-01 tax adj. | ||
| 2002-03 | 60,000 | )50,188 | 50,188 | + 01-02 tax adj. | |||
See BIM73145 for an example showing in more detail how relief is actually given.
