Farming income and expenses

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

This guidance note summarises the main tax considerations when looking at how farmers calculate their profit or losses including the treatment of income from Government schemes.

The meaning of farming and market gardening is set out in the Definition of farming trade guidance note which also includes descriptions of the types of activities which would be considered as being within the farming trade.

Farming income

‘Farming profits’ are the profits generated by the care of livestock, growing of crops and associated income from farming related grants received. It excludes non-farming income from the rental of land, buildings, equipment or non-farming investment income from company dividends, interest or similar receipts.

The receipt of grants and subsidies in farming is common and the receipts are treated for tax purposes in the same way as in any other business. It is necessary to establish if the grant or subsidy is a revenue or capital receipt which is determined by the purpose for which the grant was paid. This is usually set out in the grant documentation. A grant which subsidises

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