Commentary on Sections Overview Overview Section 221: Claim for averaging of fluctuating profits
903.This section sets out who may make an averaging claim. It is based on section 96 of ICTA (farmers) and Schedule 4A to ICTA (creative artists). In the case of creative artists a claim may be made in respect of the profits of a trade carried on wholly outside the United Kingdom. See Change 58 in Annex 1.
904.In the case of a person assessed on the remittance basis, the assessment is on the amount of “sums received” rather than the profits. So a claim may not be made in respect of income assessed on the remittance basis.
905.Subsection (2) extends the meaning of farming to include market gardening and factory farming. See Change 59 in Annex 1.
906.Subsection (4) makes it clear that “profits from a trade” means the amount before the deduction of losses. If a loss is sustained in the trade for the relevant tax year subsection (5) ensures that it does not create a negative profit for the purposes of averaging; it results in a profit of nil.
907.The reference in section 96(7)(c) of ICTA to any deduction for stock relief under Schedule 9 to FA 1981 is spent. Schedule 9 was repealed by ICTA. So this Chapter omits the reference.