Farming businesses should be given flexibility in the number of years over which they average profits, farm groups have told HMRC.
The Country Land & Business Association (CLA) and NFU have called for flexibility in their responses to an HMRC consultation on how to implement a five-year period for tax averaging.
The new rules are due to come into force in April 2016. The chancellor made the concession in the Budget, after farm leaders argued it would help farmers better cope with volatility.
The government’s consultation outlines two options – the first would involve extending the existing two-year scheme to a rolling five-year basis with a volatility test in place to assess eligibility.
The second would be an optional scheme where farmers could irrevocably opt in for a fixed five-year period, irrespective of the level of volatility.
The CLA said volatility could be experienced over shorter periods than five years, so producers should be able to choose whether they wanted to average their profits over a shorter period.
The NFU admitted it had originally envisaged that farmers would be given the option of extending the period up to a maximum of five years. However, it had done some modelling work which suggested that a five-year period would be beneficial most of the time.
But it added: “We think that there may be a case for the current two-year averaging period being retained as an option, as well as introducing an extended five-year averaging period.”