Select view:

Taxes Consolidation Act, 1997 (Number 39 of 1997)

657 Averaging of farm profits.

[FA74 s16(1) to (2) and (4) to (5) and s20B (apart from proviso to subsection (2)(b)); FA75 s14(1)(a) and (b); FA77 s10; FA81 s10; FA83 s120 and Sch4; FA90 s20(2); FA97 s146(2) and Sch9 PtII]

(1) In this section—

[33]>

an individual to whom subsection (1) applies” means an individual carrying on farming in a year of assessment and—

(a) who at any time in the year of assessment is also carrying on either solely or in partnership another trade or profession,

(b) [7]>whose spouse, in a case where the individual is a married person,<[7][7]>whose spouse, in a case where the individual is a married person, or whose civil partner, in a case where the individual is in a civil partnership,<[7] is at any time in the year of assessment also carrying on either solely or in partnership another trade or profession, other than a trade consisting solely of the provision of accommodation in buildings on the farm land occupied by the individual, the provision of such accommodation being ancillary to the farming of that farm land,

(c) who at any time in the year of assessment is a director of a company carrying on a trade or profession and is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other means, to control, more than 25 per cent of the ordinary share capital of the company, or

(d) [7]>whose spouse, in a case where the individual is a married person,<[7][7]>whose spouse, in a case where the individual is a married person, or whose civil partner, in a case where the individual is in a civil partnership,<[7] is at any time in the year of assessment a director of a company carrying on a trade or profession and is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other means, to control, more than 25 per cent of the ordinary share capital of the company,

[13]>

but paragraphs (b) and (d) shall not apply in a case where [8]>the wife of an individual is treated for tax purposes as not living with her husband;<[8][8]>the wife of an individual is treated for tax purposes as not living with her husband, or the civil partner of an individual is treated for tax purposes as not living with his or her civil partner;<[8]

<[13]

[13]>

but—

(i) a reference to a trade in paragraphs (a) and (b) does not include a trade—

(I) which is ancillary to the trade of farming, and

(II) which is carried on by the individual or his or her spouse or civil partner on the farm land (within the meaning of section 664) used by the individual for the trade of farming,

and

(ii) paragraphs (b) and (d) shall not apply in a case where the wife of an individual is treated for tax purposes as not living with her husband, or the civil partner of an individual is treated for tax purposes as not living with his or her civil partner;

<[13]

<[33]

[33]>

company” means a company within the meaning of the [32]>Companies Act, 1963<[32][32]>Companies Act 2014<[32];

<[33]

[27]>

deferred tax” means the amount of income tax determined by the formula—

A - B

where—

A is the amount of income tax which would, apart from subsection (6A), be charged on an individual by virtue of subsection (6) in accordance with subsection (5) in respect of a year of assessment, and

B is the amount of income tax which would, apart from this section, be chargeable in accordance with Chapter 3 of Part 4 in respect of a year of assessment;

<[27]

[33]>

director” includes a person holding any office or employment under a company.

<[33]

[27]>

specified return date for the chargeable period” has the same meaning as in section 959A;

<[27]

[34]>

(2) The definition of “an individual to whom subsection (1) applies” shall apply in the case of [9]>a married person whose wife is carrying on farming<[9][9]>a married person whose wife is carrying on farming or a civil partner whose civil partner is carrying on farming<[9], and shall apply in such a case as if the references to the individual were references to the [10]>individual’s wife<[10][10]>individual’s wife or civil partner<[10].

<[34]

[35]>

(3) For the purposes of paragraphs (c) and (d) of the definition of “an individual to whom subsection (1) applies”, ordinary share capital which is owned or controlled in the manner referred to in those paragraphs by a person, being [11]>the spouse or a minor child<[11][11]>the spouse or civil partner, or a minor child or minor child of the civil partner,<[11] of a director, or by the trustee of a trust for the benefit of a person or persons, being or including any such person or such director, shall be deemed to be owned or controlled by such director and not by any other person.

<[35]

(4)(a) Subject to paragraph (b), where an assessment in respect of profits or gains from farming is made for any year of assessment on an individual, [36]>other than an individual to whom subsection (1) applies,<[36] the individual may on giving notice in writing to that effect to the inspector within 30 days after the date of the notice of assessment elect to be charged to income tax for that year in respect of those profits or gains in accordance with subsection (5), [25]>and—<[25][25]>and the assessment shall be amended as necessary so as to give effect to the election so made by the individual.<[25]

[26]>

(i) the Income Tax Acts shall apply in relation to the assessment as if the notice given to the inspector were a notice of appeal against the assessment under section 933, and

(ii) the assessment shall be amended as necessary so as to give effect to the election so made by the individual.

<[26]

(b) This subsection shall not apply as respects any year of assessment where for [14]>either of the 2<[14][14]>any of the 4<[14] immediately preceding years of assessment the individual was not charged to tax in respect of profits or gains from farming in accordance with section 65(1).

[15]>

(4A) Where an individual was first charged to tax in accordance with subsection (5) for the year of assessment 2014, then the individual shall be charged to tax for the year of assessment 2015 in accordance with that subsection as if a reference in that subsection to 5 years was a reference to 4 years.

<[15]

(5)(a) An individual who is to be charged to income tax for a year of assessment in respect of profits or gains from farming in accordance with this subsection shall be so charged under Case I of Schedule D on the full amount of those profits or gains determined on a fair and just average of the profits or gains from farming of the individual in each of the [16]>3 years<[16][16]>5 years<[16] ending on the date in the year of assessment to which it has been customary to make up accounts or, where it has not been customary to make up accounts, on [2]>the 5th day of April<[2][2]>31 December<[2] in the year of assessment.

[3]>

(aa) As respects the year of assessment 2001, this subsection shall apply as if in paragraph (a) “74 per cent of the full amount of those profits or gains” were substituted for “the full amount of those profits or gains”.

(ab) For the purposes of paragraph (a), where an individual makes up annual accounts to a date in the period from 1 January 2002 to 5 April 2002, those accounts shall, in addition to being accounts made up to a date in the year of assessment 2002, be treated as accounts made up to a date in the year of assessment 2001.

<[3]

(b) Any profits or gains arising to, and any loss sustained by, the individual in the [16]>3 years<[16][16]>5 years<[16] referred to in paragraph (a) in the carrying on of farming shall be aggregated for the purposes of this subsection.

(6)(a) Subject to paragraph (b) and subsection (7), where as respects a year of assessment an individual duly elects in accordance with subsection (4), the individual shall be charged to income tax for that year and for each subsequent year of assessment in respect of profits or gains from farming in accordance with subsection (5).

[37]>

(b) This subsection shall not apply for any year of assessment in which the individual—

<[37]

[37]>

(b) This subsection shall not apply for any year of assessment in which the individual is not chargeable to tax on profits or gains from farming.

<[37]

(i) is an individual to whom subsection (1) applies, or

(ii) is not chargeable to tax on profits or gains from farming.

[28]>

(6A)(a) Where for a year of assessment an individual is by virtue of subsection (6) chargeable to income tax in respect of profits or gains from farming in accordance with subsection (5), that individual may, on including a claim in that behalf with the return required under Chapter 3 of Part 41A for the year of assessment, elect to defer payment of the deferred tax for that year of assessment.

(b)Where an individual duly elects in accordance with paragraph (a) in respect of a year of assessment, the deferred tax in respect of the year of assessment shall be payable in 4 equal instalments.

(c)The first instalment of the 4 instalments referred to in paragraph (b) shall be due and payable on or before the specified return date for the chargeable period of the year of assessment following the year of assessment in which the election, referred to in paragraph (a), is made and the remaining 3 instalments shall be due and payable respectively on or before each of the following 3 anniversaries of the date on which the first instalment was due and payable.

(d)An individual shall only be entitled to make an election in accordance with this subsection in a year of assessment provided [38]>an election has not been made<[38][38]>an election in accordance with this subsection or subsection (6B) has not been made<[38] in any of the 4 years of assessment immediately preceding such year of assessment.

<[28]

[39]>

(6B)(a) In this subsection—

Covid-19 period” means the period beginning on 1 January 2020 and ending on 31 December 2020;

Covid-19 deferred tax” means the amount of income tax determined by the formula—

A — B

where—

A is the amount of income tax which would, apart from this subsection, be charged on an individual by virtue of subsection (6) in accordance with subsection (5) in respect of a year of assessment, and

B is the amount of income tax which would, apart from this subsection, be chargeable in accordance with Chapter 3 of Part 4 in respect of the year of assessment 2020.

(b) This subsection applies to an individual who—

(i) has made a claim under subsection (6A) in respect of the year of assessment 2019 or one of the 3 immediately preceding years of assessment, and

(ii) sustains a loss in the Covid-19 period.

(c) Where an individual to whom this subsection applies is, by virtue of subsection (6), chargeable to income tax in respect of profits or gains from farming in accordance with subsection (5), that individual may, on including a claim in that behalf with the return required under Chapter 3 of Part 41A for the year of assessment, elect to defer payment of the Covid-19 deferred tax.

(d) Where an individual duly elects in accordance with paragraph (c) in respect of a year of assessment, the Covid-19 deferred tax in respect of that year of assessment shall be payable in 4 equal instalments.

(e) The first instalment of the 4 instalments referred to in paragraph (d) shall be due and payable on or before the specified return date for the chargeable period of the year of assessment following the year of assessment in which the election, referred to in paragraph (c), is made and the remaining 3 instalments shall be due and payable respectively on or before each of the following 3 anniversaries of the date on which the first instalment was due and payable.

<[39]

[17]>

(7) Where for a year of assessment an individual is by virtue of subsection (6) chargeable to income tax in respect of profits or gains from farming in accordance with subsection (5) and the individual was so chargeable for each of the 3 years of assessment immediately preceding the year of assessment, he or she may, [1]>by notice in writing given to the inspector with the return required under section 951 for the year of assessment<[1][1]>on including a claim in that behalf with the return required under [12]>section 951<[12][12]>Chapter 3 of Part 41A<[12] for the year of assessment<[1], elect to be charged to tax for that year of assessment in accordance with Chapter 3 of Part 4; but, where in the case of an individual subsection (6) does not apply for any year of assessment by reason of paragraph (b)(i) of that subsection, the individual shall be deemed to be entitled to elect and to have duly elected, as respects that year of assessment, in accordance with this subsection.

<[17]

[17]>

(7) Subject to subsection (7A), where for a year of assessment an individual is by virtue of subsection (6) chargeable to income tax in respect of profits or gains from farming in accordance with subsection (5) and the individual was so chargeable for each of the 5 years of assessment immediately preceding the year of assessment, he or she may, on including a claim in that behalf with the return required under Chapter 3 of Part 41A for the year of assessment, elect to be charged to tax for that year of assessment in accordance with Chapter 3 of Part 4[41]>; but where in the case of an individual<[41] subsection (6) does not apply for any year of assessment by reason of paragraph (b)(i) of that subsection, the individual shall be deemed to be entitled to elect and to have duly elected, as respects that year of assessment, in accordance with this subsection.

<[17]

[18]>

(7A) (a) Where as respects the year of assessment 2015 an individual duly elects or is deemed to have elected in accordance with subsection (7) that subsection shall be construed as if a reference to 5 years in that subsection was a reference to 3 years, and

(b) where as respects the year of assessment 2016 an individual duly elects or is deemed to have elected in accordance with subsection (7) that subsection shall be construed as if a reference to 5 years in that subsection was a reference to 4 years.

<[18]

(8) Where as respects a year of assessment an individual duly elects or is deemed to have elected in accordance with subsection (7)

(a) the individual shall be charged to income tax for that year and for each subsequent year of assessment in accordance with Chapter 3 of Part 4, and

[19]>

(b) there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of profits or gains from farming on which the individual is charged for each of the 2 years of assessment immediately preceding the year preceding the year of assessment, as respects which the individual elects or is deemed to have elected in accordance with subsection (7), shall be not less than the amount on which the individual is charged by virtue of subsection (6) in accordance with subsection (5) for the year preceding the year of assessment.

<[19]

[19]>

(b) there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of profits or gains from farming on which the individual who, in respect of the year of assessment 2015 duly elects or is deemed to have elected in accordance with subsection (7) is charged for each of the years of assessment 2012 and 2013, shall be not less than the amount on which the individual was charged by virtue of subsection (6) in accordance with subsection (5) for the year of assessment 2014,

<[19]

[20]>

(c) notwithstanding [22]>section 959Z<[22][22]>section 959AA<[22], there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of profits or gains from farming on which the individual, in the case of an individual referred to in subsection (4A), is charged to tax for each of the 3 years immediately preceding the year preceding the year of assessment as respects which the individual elects or is deemed to have elected in accordance with subsection (7), shall be not less than the amount on which the individual is charged by virtue of subsection (6) in accordance with subsection (5) for the preceding year of assessment,[29]> and<[29]

(d) in any other case, notwithstanding [23]>section 959Z<[23][23]>section 959AA<[23], there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of profits or gains from farming on which the individual is charged to tax for each of the 4 years immediately preceding the year preceding the year of assessment as respects which the individual elects or is deemed to have elected in accordance with subsection (7), shall be not less than the amount on which the individual is charged by virtue of subsection (6) in accordance with subsection (5) for the preceding year of [30]>assessment.<[30][30]>assessment, and<[30]

<[20]

[31]>

(e)notwithstanding section 959AA, there shall be made such assessment or assessments, if any, as may be necessary to secure the payment of any [40]>deferred tax<[40][40]>deferred tax or Covid-19 deferred tax<[40] which remains due and payable.

<[31]

[4]>

(8A) Where as respects the year of assessment 2002 an individual duly elects or is deemed to have elected in accordance with subsection (7), subsection (8) shall apply as if the following were substituted for paragraph (b) of that subsection:

“(b) there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of the profits or gains from farming on which the individual is charged for each of the years of assessment 1999-2000 and 2000-2001 shall be not less than 135 per cent of the amount on which the individual is charged by virtue of subsection (6) in accordance with subsection (5) for the year of assessment 2001.”.

(8B) Where as respects the year of assessment 2003 an individual duly elects or is deemed to have elected in accordance with subsection (7), subsection (8) shall apply as if the following were substituted for paragraph (b) of that subsection:

“(b) there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of the profits or gains from farming on which the individual is charged for the year of assessment 2000-2001 and the year of assessment 2001 shall be—

(i) in the case of the year of assessment 2000-2001, not less than, and

(ii) in the case of the year of assessment 2001, not less than 74 per cent of,

the amount on which the individual is charged by virtue of subsection (6) in accordance with subsection (5) for the year of assessment 2002.”.

(8C) Where as respects the year of assessment 2004 an individual duly elects or is deemed to have elected in accordance with subsection (7), subsection (8) shall apply as if the following were substituted for paragraph (b) of that subsection:

“(b) there shall be made such assessment or assessments, if any, as may be necessary to secure that the amount of the profits or gains from farming on which the individual is charged for each of the years of assessment 2001 and 2002 shall be—

(i) in the case of the year of assessment 2001, not less than 74 per cent of, and

(ii) in the case of the year of assessment 2002, not less than,

the amount on which the individual is charged by virtue of subsection (6) in accordance with subsection (5) for the year of assessment 2003.”.

<[4]

(9) In determining for any year of assessment what capital allowances, balancing allowances or balancing charges are to be made to or on an individual in taxing a trade of farming in accordance with subsection (5), the individual shall be deemed to be chargeable for that year of assessment in respect of the profits or gains of the trade in accordance with section 65(1).

(10) Nothing in this section shall prejudice or restrict the operation of section 67 in any case where a trade of farming is permanently discontinued.

[6]>

(10A) Where the commencement of a partnership to which [24]>European Communities (Milk Quota) (Amendment) Regulations 2002 (S.I. No. 97 of 2002) apply<[24][24]>section 667C applies<[24], would otherwise result in the permanent discontinuation of another trade of farming then, notwithstanding subsection (10) and solely for the purposes of the application of this section, the partnership trade shall be treated as a continuation of that other trade.

<[6]

[21]>

(11) Where for any year of assessment a loss is aggregated with profits or gains in accordance with subsection (5)(b) and the amount of the loss is in excess of the profits or gains, one-third of the amount of such excess shall be deemed for the purposes of Chapter 1 of Part 12 to be a loss sustained in the trade of farming in the final year of the 3 years on the average of the profits or gains of which the individual is to be charged to tax for that year of assessment, and any loss so aggregated shall not be eligible for relief under any provision of the Income Tax Acts apart from this subsection.

<[21]

[21]>

(11) Where for any year of assessment a loss is aggregated with profits or gains in accordance with subsection (5)(b) and the amount of the loss is in excess of the profits or gains—

(a) in the case of an individual referred to in subsection (4A), one-quarter of the amount of such excess shall be deemed for the purposes of Chapter 1 of Part 12 to be a loss sustained in the trade of farming in the final year of the 4 years, and

(b) in any other case, one-fifth of the amount of such excess shall be deemed for the purposes of Chapter 1 of Part 12 to be a loss sustained in the trade of farming in the final year of the 5 years,

on the average of the profits or gains of which the individual is to be charged to tax for that year of assessment, and any loss so aggregated shall not be eligible for relief under any provision of the Income Tax Acts apart from this subsection.

<[21]

[5]>

(11A) As respects the year of assessment 2001, subsection (11) shall apply as if in that subsection “74 per cent of one-third of the amount of such excess” were substituted for “one-third of the amount of such excess” and, where this subsection applies, the individual may claim that 26 per cent of one-third of the amount of the excess referred to in subsection (11) shall, notwithstanding anything to the contrary in that subsection, be carried forward under section 382 for deduction from or set-off against the profits or gains of the individual from farming for any subsequent year of assessment.

<[5]

(12) The profits or gains from farming on which an individual is to be charged to tax for any year of assessment by virtue of subsection (6) in accordance with subsection (5) shall be deemed to be the profits or gains from farming of that individual in determining his or her total income for that year for the purposes of the Income Tax Acts apart from this section, and any provision of those Acts relating to the delivery of any return, account (including balance sheet), statement, declaration, book, list or other document or the furnishing of any particulars shall apply as if this section had not been enacted.

[1]

[-] [+]

Substituted by FA01 s78(2)(c). Applies as respects the year of assessment 2001 and subsequent years and as respects accounting periods of companies ending on or after 1 April 2001.

[2]

[-] [+]

Substituted by FA01 sched2(37)(a)(i).

[3]

[+]

Inserted by FA01 sched2(37)(a)(ii).

[4]

[+]

Inserted by FA01 sched2(37)(b).

[5]

[+]

Inserted by FA01 sched2(37)(c).

[6]

[+]

Inserted by FA08 s15.

[7]

[-] [+] [-] [+]

Substituted by F(No.3)A11 sched1(170). Shall have effect from 27 July 2011.

[8]

[-] [+]

Substituted by F(No.3)A11 sched1(171). Shall have effect from 27 July 2011.

[9]

[-] [+]

Substituted by F(No.3)A11 sched1(172). Shall have effect from 27 July 2011.

[10]

[-] [+]

Substituted by F(No.3)A11 sched1(173). Shall have effect from 27 July 2011.

[11]

[-] [+]

Substituted by F(No.3)A11 sched1(174). Shall have effect from 27 July 2011.

[12]

[-] [+]

Substituted by FA12 sched4(part2)(g).

[13]

[-] [+]

Substituted by FA14 s20(a)(i). Comes into operation on 1 January 2015.

[14]

[-] [+]

Substituted by FA14 s20(a)(ii). Comes into operation on 1 January 2015.

[15]

[+]

Inserted by FA14 s20(a)(iii). Comes into operation on 1 January 2015.

[16]

[-] [+] [-] [+]

Substituted by FA14 s20(a)(iv). Comes into operation on 1 January 2015.

[17]

[-] [+]

Substituted by FA14 s20(a)(v). Comes into operation on 1 January 2015.

[18]

[+]

Inserted by FA14 s20(a)(vi). Comes into operation on 1 January 2015.

[19]

[-] [+]

Substituted by FA14 s20(a)(vii)(I). Comes into operation on 1 January 2015.

[20]

[+]

Inserted by FA14 s20(a)(vii)(II). Comes into operation on 1 January 2015.

[21]

[-] [+]

Substituted by FA14 s20(a)(viii). Comes into operation on 1 January 2015.

[22]

[-] [+]

Substituted by FA15 s19(2)(a)(i)(I). Comes into operation on 1 January 2016.

[23]

[-] [+]

Substituted by FA15 s19(2)(a)(i)(II). Comes into operation on 1 January 2016.

[24]

[-] [+]

Substituted by FA15 s19(2)(a)(ii). Comes into operation on 1 January 2016.

[25]

[-] [+]

Substituted by F(TA)A15 s37(8)(a)(i). With effect from 21 March 2016 per S. I. No 110 of 2016.

[26]

[-]

Deleted by F(TA)A15 s37(8)(a)(ii). With effect from 21 March 2016 per S. I. No 110 of 2016.

[27]

[+] [+]

Inserted by FA16 s18(1)(a). Applies for the year of assessment 2016 and subsequent years of assessment.

[28]

[+]

Inserted by FA16 s18(1)(b). Applies for the year of assessment 2016 and subsequent years of assessment.

[29]

[-]

Deleted by FA16 s18(1)(c)(i). Applies for the year of assessment 2016 and subsequent years of assessment.

[30]

[-] [+]

Substituted by FA16 s18(1)(c)(ii). Applies for the year of assessment 2016 and subsequent years of assessment.

[31]

[+]

Inserted by FA16 s18(1)(c)(iii). Applies for the year of assessment 2016 and subsequent years of assessment.

[32]

[-] [+]

Substituted by FA17 sched2(1)(aj). Deemed to have come into operation on 1 June 2015.

[33]

[-] [-] [-]

Deleted by by FA18 s21(a)(i). Comes into operation on 1 January 2019.

[34]

[-]

Deleted by by FA18 s21(a)(ii). Comes into operation on 1 January 2019.

[35]

[-]

Deleted by by FA18 s21(a)(ii). Comes into operation on 1 January 2019.

[36]

[-]

Deleted by by FA18 s21(a)(iii). Comes into operation on 1 January 2019.

[37]

[-] [+]

Substituted by FA18 s21(a)(iv). Comes into operation on 1 January 2019.

[38]

[-] [+]

Substituted by the Financial Provisions (Covid-19) (No. 2) Act 2020 s10(c)(i).

[39]

[+]

Inserted by the Financial Provisions (Covid-19) (No. 2) Act 2020 s10(c)(ii).

[40]

[-] [+]

Substituted by the Financial Provisions (Covid-19) (No. 2) Act 2020 s10(c)(iii).

[41]

[-]

Deleted by FA21 s24(a). Comes into operation on 1 January 2022.