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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Averaging: amendments to profits: reasons other than averaging: averaging claim in place

S222(3), S225 Income Tax (Trading and Other Income) Act 2005

Where, after an averaging claim has been made for any two tax years, the profits for both or either of the years are amended for any reason other than the making of an averaging claim, the existing claim is to be unscrambled and ignored. This may occur, for example:

  • where a claim for recovery of overpaid tax is accepted,
  • where HMRC discovers that additional trading profits are to be assessed.

However, a further claim for averaging may then be made in respect of the two years which have been unscrambled. The time limit for making such a further claim is 31 January next following the end of the tax year in which the adjustment giving rise to the unscrambling was made.

Where, as a consequence of this further claim, scope for averaging newly occurs for subsequent years, a further claim for those years may be admitted. Consequential averaging claims for years earlier than the years covered by the further claim are not available.

The above points are illustrated in the example below.


Farm profits and assessments are originally as follows:

Year Farm profits for the tax year Original claims Original claims Original claims Original claims Self-assessments Tax adj.
  £ £ £   £ £ £
2008-09 35,000 52,500       35,000  
2009-10 70,000 52,500 No claim competent     52,500 + 08-09 tax adj.
2010-11 40,000   No claim competent No claim competent   40,000  
2011-12 32,000       46,000 32,000  
2012-13 60,000       46,000 46,000 + 11-12 tax adj.

Following an enquiry, a further assessment on £10,000 is made for 2008-09. The averaging position then becomes as follows:

  Farm profits for the tax year Further claims for averaging Further claims for averaging Further claims for averaging Further claims for averaging Self-assess-ments Tax adj.
Year £ £ £ £ £ £ £
2008-09 45,000 57,500       45,000  
2009-10 70,000 57,500 48,750     57,500 + 08-09 tax adj.
2010-11 40,000   48,750 40,375   48,750 - 09-10 tax adj.
2011-12 32,000     40,375 50,187 40,375 - 10-11 tax adj.
2012-13 60,000       50,188 50,188 + 11-12 tax adj.

See BIM84145 for an example showing in more detail how relief is actually given.