Income Tax (Trading and Other Income) Act 2005

221 Claim for averaging of fluctuating profits

(1) This Chapter enables an individual (a “taxpayer”) to make a claim (an “averaging claim”) if—

(a) the taxpayer is, or has been, carrying on a qualifying trade, profession or vocation (alone or in partnership), and

(b) the taxpayer’s profits from it (“the relevant profits”) fluctuate from one tax year to the next.

(2) A trade, profession or vocation is a “qualifying trade, profession or vocation” if—

(a) it is farming or market gardening in the United Kingdom,

(b) it is the intensive rearing in the United Kingdom of livestock or fish on a commercial basis for the production of food for human consumption, or

(c) the taxpayer’s profits from it are derived wholly or mainly from creative works.

(3) For this purpose “creative works” means—

(a) literary, dramatic, musical or artistic works, or

(b) designs,

created by the taxpayer personally or, if the qualifying trade, profession or vocation is carried on in partnership, by one or more of the partners personally.

(4) For the purposes of this Chapter references to the relevant profits of a tax year are to profits before making any deduction for a loss made in any tax year.

(5) If the taxpayer makes a loss in the qualifying trade, profession or vocation in a tax year, the relevant profits of the tax year for the purposes of this Chapter are nil.