The tax landscape of farming

In the first of a three part series on farming tax, Michael Steed asks how to define farming and considers the farming tax landscape

It ought to be fairly straightforward. If a taxpayer is farming, as defined in the legislation, then the basic farming tax rules will apply. Farmers can have some standard reliefs, such as farmers’ averaging of profits, loss set-off against general income (subject to the hobby farmer rules) and the availability of the herd basis (where the production herd sits on the balance sheet, rather than in the trading account). They can have business asset disposal relief on sale or retirement (subject to the rules). They will probably mostly make zero-rated supplies for VAT; and on retirement or death, they should be able to claim the two leading inheritance tax reliefs of agricultural property relief and business property relief. In practice, it can be far less simple than that.