Chapter BIM55130
| Published date | 22 November 2013 |
| Record Number | BIM55130 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
S5, S9, S25 and S687 Income Tax (Trading and Other Income) Act 2005, S996 Income Tax Act 2007, S35, S36, S46 and S979 Corporation Tax Act 2009, S1125 Corporation Tax Act 2010
All Single Payment Scheme (SPS) receipts are income payments subject to tax. The basis of charge will, however, depend on the circumstances under which they are received.
An explanation of the terms used in the scheme is at BIM55128.
Traditional farmerThe most straightforward situation is that of ordinary commercial farmers who continue to farm as they have for many years in that they grow and harvest crops and/or rear farm animals. Such a person continues to satisfy the statutory definition of farming for tax purposes and receives the subsidy for farming in accordance with the SPS rules. As a consequence sums receivable are chargeable as trade receipts for Income Tax purposes.
Single Payment without productionUnder the SPS it is possible to receive an income without production by keeping the land in Good Agricultural and Environmental Condition (GAEC). Where there is no actual production then there can be no occupation for the purposes of husbandry and therefore no farming trade. Whether the farmer has actually ceased to farm for tax purposes will be a question of fact. One must look at the intention together with the evidence supporting the stated intention. There are several main possibilities.
- First, where only part of the holding is no longer used for production then the farm as a whole will likely continue to be worked and the farming trade continue. Similarly, where there is no production on the whole of the farm but this is a temporary measure, for example while changes are being made, then HMRC will accept the farming trade continues. However, if a return or claim is made that production has ceased only temporarily, then HMRC would expect to see the farm infrastructure maintained.
- Second, where there is a permanent cessation of all production then the trade will also have ceased. If there is no trade then the SP will be chargeable as miscellaneous income.
- Third, there may be a new trade in place of farming. If there is no farming trade for tax purposes but it can be shown that the land occupied is still managed...
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