As a result of the farming decline many fanning families are forced to contract hire their services and/or their equipment to other fanners. 'The tax office says categorically that the trade of 'the contractor' is not farming. It should be taxed separately. However, if this is occasional and the amounts are small it can be included in the fanning accounts, rather than treating it as a separate trade.

In practice many small farms can only survive with the contracting income. The structure of these trading activities can make it very difficult to extract the details from the farm profits. Many contracts take the form of share farming arrangements which are included in the farm accounts. In many circumstances it is the contracting income which secures profitability for the original farming unit and without which the farmer would have a loss which could question the five year profitability rules, i.e. there must be a profit in year six. The decision as to the tax treatment of farm contracting can therefore be critical.

If you feel you may have a problem with this issue and wish to discuss it call Stuart Atkinson on 01482 226791

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