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Farmer averaging relief - straightforward?

Farmer averaging relief - is it really that straightforward?

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I assume with the principle of farmer averaging HMRC adjust the tax liability of previous years with the current year based on averaged.

Example:
Considering a simple farmer averaging over 2years.
Actual profits show £25k; then£45k. Meets the elibibilty criteria.
I assume HMRC will increase the tax liabilbity of the first year to match the Averaged Profit and reduce the current one.

This will mean manual calculations to compare the best outcome. 

Is it really that straightforward or am I missing something?

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By SteveHa
17th Jun 2021 15:30

You don't adjust the previous year. You bring the PY adjustment into the CY calculation.

You still need to do the comparitive 2 year and 5 year calcs to see if averaging is beneficial, and don't forget the 5 year loss rule.

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By 401K
24th Jun 2021 12:36

Looked into this a little further and found lots of strange suggestions (not on here of course). I mean really strange!
In practice for those who would like to know make CY adjustment (SA104F box72) and then PY adjustment (SA110 box 14).
As SteveHa says do the manual comparisions & and don't forget the 5 year loss rule.

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