Farmer's averaging

Forgive the daft question

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Afternoon campers,

Quick question regarding averaging. Farmer made a £70k loss in 2023/24 but £15k profits in preceeding four years. It is my understanding that this gets my average profit for all five years up to and including 2023/24 to £12k PLUS I get to carry forward my £70k losses from 2023/24.

IRIS Elements is trying to force me to set part of my £70k losses against the £12k from 2023/24. This is making me doubt my interpretation of HS224 which appears to support my view.

Opinions welcomed please!

Replies (6)

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By Paul Crowley
09th Jul 2024 15:53

I currently do not trust IRIS for anything with a change in it.
The partnership that had both a change of partners and two accounting dates in is producing rubbish on all the partners in personal tax.
To make it right, I need to overwrite every entry, including overlap.

No faith in the software unless it is very very simple stuff.

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By accountantccole
10th Jul 2024 07:53
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Replying to accountantccole:
By bettybobbymeggie
10th Jul 2024 08:13

Thanks for your reply. I did read this but frustratingly their example is where the loss happened before the profit whereas mine is the other way around. That said, HS224's example 2 is as follows:

Example 2 — Two Year Averaging
Year - 2021 to 2022 loss of £20,000
Year - 2020 to 2021 profit of £32,000

2020 to 2021 profit is increased from £0 to £16,000 and this increase of £16,000 must be entered in box 72 on page SEF 4. The loss of £20,000 should be entered in box 77.

This is my scenario exactly but I am doubting myself because IRIS says I need to use the £20k loss against the £16k averaging adjustment in 2021/22.

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paddle steamer
10th Jul 2024 09:03

(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.


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By Ardeninian
10th Jul 2024 11:30

You are right and IRIS is wrong. s84 ITA (carry forward loss relief for the loss arising in 2023/24) is deducted from the profits of the next tax year first, not the current tax year. So you are under no obligation to use the losses against the 2023/24 adjusted profit, as the working sheet for SA103 should confirm

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By bettybobbymeggie
11th Jul 2024 15:42

Thanks for the replies. Happily IRIS support came back to me and suggested I clear the cache - highly likely to fix [***]ty software.

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