Self-employed farmers and creative artists can, subject to specific conditions, average the profits arising in two consecutive years to establish the profits chargeable to income tax for each of those years.
Financial Bill 2016 contains provisions to allow self-employed farmers to average profits over a two or a five year period from April 2016. In addition, the existing two year averaging rules will be amended to remove the marginal relief provisions.
The introduction of this new legislation is part of the governments scheme to provide a more efficient, productive and resilient agricultural industry within the UK and support farmers as their profits often fluctuate significantly year to year. Although this will potentially help farmers, the extra administration that comes with averaging out profits over 5 years may be a hindrance to the agricultural market however.