Farmers Five Year Averaging

Paul Short Accountant EssexPosted by Paul Short:

When the Chancellor announced that farmers would have the opportunity to average their profits over five years in addition to the long established 2 year rule, I was rather underwhelmed.

Indeed, the NFU, who had lobbied for this extension, were also a little embarrassed as the Government hyped up the extension to show that they were listening to the agricultural lobby.

I did not think that the ability to average over five years would generate very much more by way of tax savings than could be secured from the regular review every two years.  Relatively benign income tax rates, certainly at the lower level, often mean that the emerging repayment, after averaging, is disappointing.

In actual fact I have been surprised by the number of worthwhile five year averaging claims we have done thus far this year, as we complete our clients’ 2017 tax returns.

There may be many reasons for this.  In some cases we are finding we are picking up a very successful year in say 2012/13.  There may have been other income affecting the position.  Whatever the reason, the five year averaging is proving very useful.

Accordingly, I do feel it is worth mentioning this to your farming clients, in case their advisor is unaware of the extension or, as was my initial reaction, has dismissed it as being of no use.

November 2017


The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

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