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HMRC internal manual

Business Income Manual

Farming: insurance compensation: compulsory slaughter of animals

S25 Income Tax (Trading and Other Income) Act 2005, S46 Corporation Tax Act 2009

Farmers may insure privately against the compulsory slaughter of animals (see BIM55180). The insurance may cover any shortfall between DEFRA compensation and the market value of the animal as, in some cases, DEFRA pays only a percentage of the animal’s value and/or any consequential loss of profits (for instance, from loss of milk sales from a dairy herd).

Payments of compensation received under such policies should be dealt with as follows:

  • Compensation in respect of the value of the destroyed animal should be dealt with in the same way as DEFRA compensation (see BIM55180).
  • Compensation for consequential loss should be treated as a trading receipt.