Income Tax (Trading and Other Income) Act 2005

[F1 225ZD Effect of claim for spreading profits U.K.

(1) If the farmer makes a claim under section 225ZB in respect of the total compensation profit for a period of account (“period X”), the profits of the trade carried on by the farmer are to be adjusted for income tax purposes as follows—

• Step 1

  Treat the compensation payable for all of the relevant animals slaughtered in period X as a receipt of that period (regardless of when the compensation is finally determined or paid).

• Step 2

  If the farmer makes a profit in the trade in Year 1, deduct from the profits of Year 1 an amount equal to—

  (a)

  the total compensation profit for period X, or

  (b)

  if the total compensation profit exceeds the profits of Year 1, such portion of the total compensation profit as will reduce the profits to nil.

  • “Year 1” is—

    (a)

    the tax year whose basis period includes the whole or a part of period X, or

    (b)

    if there is more than one, the earliest of those tax years.

• Step 3

  If—

  (a)

  there is more than one tax year whose basis period includes the whole or a part of period X,

  (b)

  either—

  (i)

  the farmer did not make a profit in the trade in Year 1, or

  (ii)

  by virtue of step 2, a portion only of the total compensation profit for period X is deducted from the profits of Year 1, and

  (c)

  the farmer makes a profit in the trade in the next tax year (“Year 2”),

  deduct from the profits of Year 2 the applicable amount.

  In a case where the farmer did not make a profit in Year 1, “the applicable amount” is—

  (a)

  the total compensation profit for period X, or

  (b)

  if the total compensation profit exceeds the profits of Year 2, such portion of the total compensation profit as will reduce the profits to nil.

  In a case where a portion only of the total compensation profit for period X is deducted from the profits of Year 1, “the applicable amount” is—

  (a)

  an amount equal to the difference between the total compensation profit for period X and the portion so deducted, or

  (b)

  if that amount exceeds the profits of Year 2, such portion of that amount as will reduce the profits to nil.

  No further deduction is to be made in respect of the total compensation profit for period X from the profits of any later tax year whose basis period includes a part of that period.

• Step 4

  Include in the profits of each of the 3 consecutive tax years following Year 1 an amount equal to one third of the total amount deducted by virtue of steps 2 and 3.

(2) Nothing in this section affects the calculation of overlap profit (within the meaning of Chapter 15 of this Part).]

Textual Amendments

F1 Pt. 2 Ch. 16ZA inserted (1.3.2012) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 6 (with art. 9)