The Government’s commitment to extend the averaging period for farmers’ profits to five years has been opened for consultation giving producers the opportunity to choose how they’re like the new system to work.
The new system is due to come into force from April 2016, at which point the current two-year averaging option will be stepped up the promised five, a move the Government says will help farmers to “better manage market volatility”.
The main choice on offer through the consultation process is between an upgrade of the present system, which is based on the use of a “volatility test” and one which would operate without such a requirement, but with reduced flexibility in other areas.
The choice for farmers, as stated by the Government, is as follows:
- Option A is based on the rules for the current two-year system with changes to deliver the extension to a five-year averaging period. The current “volatility test” would be retained (that is, farmers may only qualify for averaging if the difference between profits in a good year and a bad year is at least 70%). Farmers could decide each year if tax averaging would be beneficial to them.
- Option B would significantly reduce the current qualifying conditions and provide automatic averaging for a fixed period of five years. There would be no requirement for an annual claim, but farmers would need to opt in for a full five years. There would be no volatility test.
The consultation period runs until 12am on September 7, 2015.