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HMRC internal manual

Debt Management and Banking Manual

Pre-enforcement: consider the defaulter: farmers and market gardeners

Individuals and partnerships (but not companies) carrying on a trade of farming or market gardening may choose for tax purposes to average the profits made in any two consecutive years. They exercise this choice by what is known as an `averaging claim`. They do not have to be assessed as farmers, but the business must consist of the intensive rearing of livestock on a commercial basis, for the production of food for human consumption.

Time limits for making a claim

An averaging claim should be made not later than -

  • two years after the end of the second year of assessment to which it relates, for pairs of years up to 1995-96 and 1996-97
  • 22 months after the end of the second year of assessment, for pairs of years 1996-97 and 1997-98 onwards.

Schedule D cases

In a schedule D case, if an averaging claim is made after an appeal has been determined, the assessing office may still stand over part of the tax, making it appear that the collectible tax is a non-postponed amount.

If we were to take court proceedings for the ‘NPA’ it would preclude proceedings to recover any further amount that became due on settlement of the averaging claim. Before you start enforcement proceedings for what appears to be a non-postponed amount, you should send a memo to the assessing office asking

  • if there is an unsettled averaging claim for the year in question and if so
  • whether the assessment was determined on appeal.

If the assessing office answers `yes’ to both questions, make determined efforts to obtain voluntary settlement of the collectible amount and maintain close liaison with the assessing office until the claim is settled. Do not start enforcement proceedings.

If the assessing office answers ‘No’ to either question, collect the amount in the normal way and take enforcement proceedings as necessary.

Self assessment cases

For SA years averaging claims must be made in the return or by amendment to the return. You will not see any evidence of the claim. Where there is an unpaid debt you should take enforcement proceedings if necessary.