Farmers Flashcards
Introduction
Which Basis of Accounting is Used Where Averaging or Herd Basis Claims Are Made?
The Accruals Basis.
Averaging
Trades Which Can Average Profits Over 2 Consecutive Tax Years Consist of:
- Farmers;
- Market Gardeners;
- Authors;
- Creative Artists.
Averaging
Which Trades Can Also Average Profits Over 5 Consecutive Tax Years?
Farmers and Market Gardeners.
Averaging
Which Tax Years of Trading is Averaging Not Allowed?
The First and Final Years.
2-Year Averaging
What Condition Must be Met for a 2-Year Averaging Claim?
Lower Profits < 75% of Higher Profits.
5-Year Averaging
Which Sets of Profit are Compared for the Volatility Condition?
Profits of the 5th Tax Year to Average Profits of the First 4 Tax Years.
5-Year Averaging
The ‘Volatility Condition’ is Met Where Either:
- Lower Profits < 75% of Higher Profits;
- Profits in a Year are £Nil.
Averaging Claims
When Must an Averaging Claim be Made?
The First Anniversary of 31 January Following The Last Tax Year.
Herd Basis
What is a ‘Production Herd’?
Animals (Same Species) Kept by a Farmer Wholly or Mainly for Resale of Their Produce.
Herd Basis
What is the Effect of a Herd Basis Election?
Animals Are Treated as Fixed Assets Rather Than Trading Stock.
Irrevocable
Herd Basis
The Main Benefits of a Herd Basis Election Are:
- Maintenance Costs Are Tax-Deductible;
- Disposal Proceeds Are Tax-Free.
Animals Are ‘Wasting Chattels’
Herd Basis
Sale of Part of a Herd is Considered a Trading Receipt Where:
- No More Than 20% is Sold;
- Replacement Animals Aren’t Purchased.
Herd Basis
When Must a Herd Basis Election be Made?
The Anniversary of 31 January Following The Tax Year The Production Herd is Kept.
The Deadline is Extended by 1 Year if Trading Started in That Year
