Farmers (and market gardeners) averaging – changes for 2016/17 onwards

For a long time HMRC have recognised that farming profits can be affected by a lot of factors, including the weather and therefore to smooth out the rate of tax payable they have permitted farmers to average the profits arising across consecutive years.

The Finance Bill 2016 extends the ability to average farming profits from two to five years and also removes marginal relief. A volatility test will also have to be met. Averaging over two years will still be possible.