Arable area payments are to be regarded as a sales subsidy for tax purposes, the Inland Revenue has announced.
Provided the farmer qualifies for the payments, the income must be fully accounted for in relation to crops intended to be harvested, once the harvest is sold.
“AAPs attributed to the sold crop are treated as earned in full,” says Jeremy de Souza, tax partner at Farrer & Co. “Of those attributed to crops which have been harvested and are in store, 75% is brought into the accounts for tax purposes. In effect, a farmer may defer 25% of the AAP relating to his unsold corn until the next year.” The percentage of profits taxed will depend on the different annual qualifying dates.
