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HMRC internal manual

Business Income Manual

Farming in tax law: definition of farming

S9 Income Tax (Trading and Other Income) Act 2005, S996(1) Income Tax Act 2007 (ITA 2007), S36 Corporation Tax Act 2009, S1125 Corporation Tax Act 2010 (CTA 2010)

Farming is treated for the purposes of both Income Tax and Corporation Tax as a trade whether or not the land is managed on a commercial basis and with a view to the realisation of profits.

Farming is defined in both the ITA 2007 and the CTA 2010 as being the occupation of land wholly or mainly for the purposes of husbandry but excluding any market gardening. Although for the purposes of defining farming for tax purposes no restriction is put on where the land is situated, the automatic treatment of farming as a trade is restricted to land farmed within the United Kingdom.

Three features of this definition are considered as follows:

  • occupation of land (BIM55055)
  • in the United Kingdom (BIM55095)
  • wholly or mainly for the purposes of husbandry (BIM55100)

Significance of definition

The definition is of significance because a number of statutory provisions apply, or refer, specifically to farming. These include:

  • All farming to be treated as a trade (see BIM55110), and all farming carried on by a particular person (or partnership or body of persons) to be treated as a single trade (see BIM55115).
  • Averaging of profits (see BIM84000 onwards).
  • Herd Basis (see BIM55500 onwards) (although not restricted to farming).
  • Restriction of loss relief where losses incurred in the five previous years (see BIM85600 onwards).