Income Tax (Trading and Other Income) Act 2005 section 225ZD

Effect of claim for spreading profits

Section 225ZD sets out how a farmer's trading profits are adjusted for income tax purposes when a claim is made to spread the profit arising from compensation received for animals compulsorily slaughtered.

• Compensation for all relevant animals slaughtered in the accounting period is treated as a receipt of that period, regardless of when it is actually determined or paid.
• The total compensation profit is deducted from the farmer's trading profits in Year 1 (and, if necessary, Year 2), but only to the extent needed to reduce those years' profits to nil.
• The total amount deducted in Years 1 and 2 is then spread equally by adding one third of that total to each of the three consecutive tax years following Year 1.
• The calculation of overlap profit under Chapter 15 of the same Part of the Act is unaffected by this spreading adjustment.