Income Tax (Trading and Other Income) Act 2005 section 221

Claim for averaging of fluctuating profits

Section 221 sets out who may make an averaging claim in respect of fluctuating profits from certain qualifying trades, professions or vocations, and defines the key terms used throughout the averaging provisions.

• An individual carrying on a qualifying trade, profession or vocation (alone or in partnership) whose profits fluctuate from year to year may make an averaging claim
• Qualifying activities for two-year averaging include UK farming or market gardening, intensive UK rearing of livestock or fish for human consumption, and trades whose profits derive wholly or mainly from creative works
• Five-year averaging is available only for farming, market gardening, and intensive rearing of livestock or fish — not for creative artists
• Relevant profits are measured before deducting losses (with losses treated as nil profit) and after any adjustment for compensation for compulsory slaughter of animals