Currently farmers are able to average their profits over two consecutive years where the difference in profits over those two years is 30% or more. There is a marginal relief where the difference is between 25% and 30%. This relief is useful where the profits straddle different marginal income tax rates.
In line with announcements in the Autumn statement 2015, Finance Act 2016 will include provisions to bring into effect the extension of the averaging period to five years.
This measure will provide farmers with fluctuating profits additional flexibility to manage their tax requirements and obligations.