What is farming? What are the tax consequences and tax considerations of farming? What expenses can farmers claim for tax purposes? Are there special tax and accounting rules for farmers? What are the VAT rules for farmers? What are the tax consequences of diversification? 

Subscribers see Farming: Tax Overview for your detailed version of this guide.

This is a freeview 'At a glance' guide to farming businesses. 

What is farming?

Farming means the occupation of land wholly or mainly for the purposes of husbandry but does not include Market gardening.

Income Tax trading losses

Special computational rules for farmers 

Farming businesses are subject to a number of special computational rules. These include: 

Inheritance Tax reliefs

Farmhouses 

See Farming: Tax Overview

Farm worker’s cottages

Farming and grants

Diversification

Many farmers look to generate additional income from their assets through diversification. This can have a significant tax impact for IHT (affecting APR and BPR), Income Tax, Capital Gains Tax (CGT) and VAT.  

See Farming: Tax Overview for a discussion of the tax consequences of different forms of diversification, including: 

What expenses can farmers claim? 

For a detailed list of expenses that farmers can claim, see Farming: Tax Overview

Capital expenditure

Farms often incur significant capital expenditure. Much of this will be on plant and machinery where it is relatively simple to identify the allowances which are available. 

Other forms of farming capital expenditure need detailed consideration. These often involve land and buildings. Examples include: 

For some assets, there are special rules which apply only to farming trades. See Farming: Capital allowances

Case law

For the latest farming case law, see Farming: Tax Overview

VAT

While most farming activities will be zero-rated, as farms diversify it is not unusual to see standard-rated and exempt supplies also being made. 

Useful guides on this topic

Farming: Tax Overview
What is farming? What are the tax consequences and tax considerations of farming? What are the features of agricultural tenancies? What expenses can farmers claim for tax purposes? Are there special tax and accounting rules for farmers? What are the VAT rules for farmers?

Farming: Capital allowances
What types of expenditure may qualify for capital allowances in farming businesses? What farming-specific points need to be considered?

Averaging claims
When can profits be averaged? What trades do averaging apply to? How are averaging adjustments calculated and made?

Herd basis: Farming
The 'herd basis' recognises, for tax purposes, the economic nature of animals held for production as capital assets, rather than as trading stock. This can be of benefit to some farmers and result in tax savings.

IHT Agricultural Property Relief
What is Agricultural Property Relief (APR)? When does it apply? What are the conditions and restrictions of the relief?

Flat rate scheme: Farmers
What is the agricultural flat rate scheme? Who can use it? What are the conditions? What is the benefit? What about non-farming income? 

Losses (sideways): Restriction for uncommercial trades
What is sideways loss relief? What restrictions apply? When do they apply? What is an uncommercial trade?

Market Gardening: Tax Overview
What is market gardening? What are the tax consequences?  

Woodlands: Overview
Woodlands and forestry ownership carry significant tax reliefs, including Income Tax, Capital Gains Tax (CGT) and Inheritance Tax (IHT). This is a guide to those reliefs. 


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