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HMRC internal manual

Business Income Manual

Farming quotas: reduction in milk quotas

In order to regulate the milk market and limit overproduction, the EU may from time to time impose either:

  • the temporary suspension of a percentage of milk quotas, or
  • a permanent reduction in milk quotas (effectively a compulsory cut).

In each case, regulations allow for compensation payments to be made.

The tax treatment of the compensation payments depends on whether the reduction in quotas is temporary or permanent. Payments for temporary suspension are normally trading receipts (see BIM55325) and payments for permanent reductions are capital receipts (see BIM55330).