Finance Act, 1981

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Chapter II

Taxation of farming profits

Averaging of farm profits.

10.—The Finance Act, 1974 , is hereby amended by the insertion of the following section after section 20A (inserted by the Finance Act, 1978 ):

“20B.—(1) Where an assessment in respect of profits or gains from farming is made on an individual, other than an individual to whom section 16 applies, for any year of assessment (being the year 1981-82 or any subsequent year of assessment), he may upon giving, within 30 days after the date of the notice of assessment, notice in writing to that effect to the inspector, elect to be charged to tax for that year in respect of those profits or gains in accordance with the provisions of subsection (2), and all the provisions of the Income Tax Acts (including, in particular, the provisions relating to appeals against assessments and payments on account) shall apply in relation to the said assessment as if the notice given to the inspector were a notice of appeal against the assessment under section 416 of the Income Tax Act, 1967 , and the said assessment shall be amended as necessary so as to give effect to the election so made by the individual:

Provided that this subsection shall not apply as respects any year of assessment where for either of the two immediately preceding years of assessment the individual was not charged to tax in respect of profits or gains from farming in accordance with the provisions of section 58 (1) of the Income Tax Act, 1967 .

(2) (a) An individual who is to be charged to tax for a year of assessment in respect of profits or gains from farming in accordance with the provisions of this subsection shall be so charged under Case I of Schedule D on the full amount of those profits or gains determined upon a fair and just average of the profits or gains from farming of the individual in each of the three years ending on that date in the year immediately preceding the year of assessment to which it has been customary to make up accounts, or where it has not been customary to make up accounts, on the 5th day of April immediately preceding the year of assessment.

(b) Any profits or gains arising to and any loss sustained by the individual in the said three years in the carrying on of farming shall be aggregated for the purposes of this subsection:

Provided that this paragraph shall not apply to a loss sustained prior to the 6th day of April, 1981, and the said loss shall not be aggregated with profits or gains for the purposes of this subsection.

(3) Where, as respects a year of assessment, an individual duly elects in accordance with subsection (1), he shall, subject to subsection (4), be charged to tax for that year and for each subsequent year of assessment, in respect of profits or gains from farming, in accordance with the provisions of subsection (2):

Provided that this subsection shall not apply for any year of assessment in which the individual—

(a) is an individual to whom section 16 applies, or

(b) is not, by virtue of section 15 (3), chargeable to tax on profits or gains from farming.

(4) Where, for a year of assessment, an individual is, by virtue of subsection (3), chargeable to tax in respect of profits or gains from farming in accordance with the provisions of subsection (2) and he was so chargeable for each of the three years of assessment immediately preceding the year of assessment, he may, by notice in writing given to the inspector within six months before the 6th day of July in the said year of assessment, elect to be charged to tax for that year of assessment in accordance with the provisions of section 58 of the Income Tax Act, 1967 :

Provided that where, for any year of assessment, in the case of an individual, subsection (3) does not apply by reason of paragraph (a) of the proviso to the said subsection (3), he shall be deemed to be entitled to elect and to have duly elected, as respects that year of assessment, in accordance with this subsection.

(5) Where, as respects a year of assessment, an individual duly elects or is deemed to have elected in accordance with subsection (4)—

(a) he shall be charged to tax for that year and for each subsequent year of assessment in accordance with the provisions of section 58 of the Income Tax Act, 1967 , and

(b) there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of profits or gains from farming on which he is charged for each of the two years of assessment immediately preceding the year preceding the year of assessment, as respects which the individual elects or is deemed to have elected in accordance with subsection (4), shall be not less than the amount on which he is charged by virtue of subsection (3) in accordance with the provisions of subsection (2) for the said year preceding the year of assessment.

(6) In determining, for any year of assessment, what capital allowances, balancing allowances or balancing charges fall to be made to or on an individual in taxing a trade of farming in accordance with the provisions of subsection (2), he shall be deemed to be chargeable for that year of assessment in respect of the profits or gains of the said trade in accordance with the provisions of section 58 (1) of the Income Tax Act, 1967 .

(7) Nothing in this section shall prejudice or restrict the operation of section 58 (5) of the Income Tax Act, 1967 , in any case where a trade of farming is permanently discontinued.

(8) Where, for any year of assessment, a loss is aggregated with profits or gains in accordance with subsection (2) (b), and the amount of the said loss is in excess of the said profits or gains, one-third of the amount of such excess shall be deemed for the purposes of Chapter I of Part XIX of the Income Tax Act, 1967 , to be a loss sustained in the trade of farming in the final year of the three years on the average of the profits or gains of which the individual is to be charged to tax for that year of assessment, and any loss so aggregated shall not be eligible for relief under any provision of the Income Tax Acts, apart from this subsection.

(9) The profits or gains from farming of an individual, on which he is to be charged to tax for any year of assessment by virtue of subsection (3) in accordance with the provisions of subsection (2), shall be deemed to be the profits or gains from farming of that individual in determining his total income for that year for all the purposes of the Income Tax Acts, apart from this section, and any provisions of those Acts relating to the delivery of any return, account (including balance sheet), statement, declaration, book, list or other document or the furnishing of any particulars shall apply as if this section had not been enacted.”.