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HMRC internal manual

Business Income Manual

Farming quotas: quota is fixed capital asset

S33 Income Tax (Trading and Other Income) Act 2005, S53 Corporation Tax Act 2009

A farmer holds a quota primarily in order to make a profit from carrying on the particular farming activity which it covers. She or he does not ordinarily buy and sell quota in the course of the farming trade. Accordingly, the quota has the character of an enduring asset of the farmer’s business similar to the buildings or farm machinery. A quota is normally therefore a fixed capital asset of a farmer’s business. This line received support in 2005 before the Special Commissioners in the case of DJ & RC Terry v HMRC [2005] SPC482. Dr Avery Jones held that:

’This is an extremely straightforward case. The Appellant purchased and retained an asset which gives an enduring benefit to the trade in the form of avoiding payment of superlevy, and that is the end of it. It is good to know that accountants regard the expenditure as additions to fixed assets in the balance sheet but I would have had no difficulty in coming to that conclusion on my own. Clearly it was capital expenditure.’