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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Farming in tax law: practical approach to share farming cases

S996(1) Income Tax Act 2007, S1125 Corporation Tax Act 2010

It is not necessary to subject every share farming case to scrutiny and cases should not be selected for detailed examination simply because they involve share farming. But the possibility that transactions may have been presented as trading when, in fact, they are not will be one of the factors to take into account when considering which cases to look at in depth.

The amount of income taxable on the landowner will often be much the same whether he or she is treated as a farmer taxable as a trader or as a landlord in respect of property income. The main advantage of farming treatment for the landowner lies in the reliefs from Capital Gains Tax and Inheritance Tax which are available to farmers but not to landlords.

If you question whether the arrangement represents farming for both parties, it is important that any agreement you reach with a landowner for Income Tax or Corporation Tax purposes, where there may be relatively little at stake, should not pre-empt a decision on the application of Capital Gains Tax or Inheritance Tax, where the amounts involved may be substantial. The following procedure should be adopted:

  • Where the basis of charge for Income Tax or Corporation Tax purposes has not yet been agreed you should ensure that any agreement which you reach other than after detailed examination is subject to the specific reservation that it is reached for the purposes of that tax only. In other cases where you have doubts about the status of the agreement please submit the files for both parties with a full report of the facts to CTISA before pressing a challenge to appeal.
  • Where a self-assessment has been made by the landowner on the basis that the arrangement gives rise to trading income but, as a result of subsequent enquiry, you decide that the basis is wrong, you should consider the instructions at CG60290 and CG63253 and submit your papers to CGT (Solihull).