CTM40200 - Particular bodies: farming

Farming is a major UK industry geographically spread over the whole of the country. While most farmers trade as partners in a partnership or alone as sole traders some farming enterprises are undertaken by companies. The taxation of farmers, including companies, is dealt with in accordance with the principles associated with the computation of trade profits but there are a number of important differences and peculiarities that you need to aware of when dealing with a farming account. These are briefly mentioned here but more detail can be found at BIM55000 onwards.

Farming is statutorily defined (ICTA88/S832 & ITA2007/S996) and all farming carried on by one person is treated as one trade (ICTA88/S53 & ITTOIA/S9). The implications of this are explained at BIM55050 onwards.

Many complications have arisen because of European Union grants, subsidies and quotas. The guidance in the BIM explains how to deal with these and includes appropriate cross references to the CG guidance material (BIM55150 onwards).

Stock valuations can also be problematical but an industry agreement first published as BEN19 but currently as helpsheet IR232 makes these easier to resolve (BIM55400 onwards).

Statute defines livestock as trading stock but there are exceptions including an opportunity to elect for the herd basis. These are explained at BIM55500 onwards.

Farmers can be restricted in the amount of loss relief they can claim under ITA2007/S64 or ICTA88/S393A(1) by ITA2007/S67-70 or ICTA88/S397. This legislation is explained at BIM75600 onwards.

As a result of additional influences outside their control farmers (but not companies) may be able to claim to average two consecutive years profits. Help on this can be found at BIM73100 onwards.

Finally, the usual capital allowances are available but in addition farmers can claim Agricultural Buildings Allowance which is similar to Industrial Buildings Allowance. Reference should be made to CA40000 onwards for detailed guidance.