The following Owner-Managed Businesses guidance note by Tolley in association with Julie Butler provides comprehensive and up to date tax information covering:
Fiscal farming qualifies as farming for tax purposes.
There is a special tax regime for the profits of a trade carried on in the UK under ITTOIA 2005, Part 2 and under CTA 2009, s 36(1). Whether or not a person is carrying on a trade is a question of fact, but the word ‘trade’ includes the idea of exchanging goods or services for a reward. The courts have indicated what might constitute trading in a large number of cases ― the badges of trade, see the Badges of trade guidance note. Under ITTOIA 2005, s 9(1) and CTA 2009, s 36(1) farming or market gardening conducted in the UK is treated as the carrying on of a trade for tax purposes.
Under ITA 2007, s 996 and CTA 2010, s 1125(1), ‘farming’ means the occupation of land wholly or mainly for the purposes of husbandry but does not include market gardening. Market gardening is defined as ‘the occupation of land as a garden or nursery for the purpose of growing produce for sale’ (see ITA 2007, s 996(5) and CTA 2010, s 1125(5)). To be a farmer a person must satisfy two tests: the person must be in occupation of the land and the purpose of the occupation must be mainly for husbandry. The actual use of the land will normally be indicative of the purpose of occupation, but is not necessarily conclusive. Nor need the occupation be exclusive of others (share farming is an example where two persons may occupy land and each be farmers).
‘Husbandry’ is specifically said to include hop growing and the breeding, rearing and grazing of horses in connection with those activities. If the breeding of horses does not involve land, ie the mares are ‘boarded out’, then this does not count as farming for tax purposes.
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