Explanatory Notes

Income Tax (Trading and Other Income) Act 2005

2005 CHAPTER 5

24 March 2005

Commentary on Sections

Part 2: Trading income

Chapter 2: Income taxed as trade profits
Section 9: Farming and market gardening

63.This section has two functions. First, it treats all farming or market gardening carried on in the United Kingdom as a trade. Second, it treats all farming carried on in the United Kingdom by a particular person as a single trade. It is based on section 53(1) and (2) of ICTA.

64.Subsection (1) deals with the first function. In most cases there will be no doubt that farming is a trade on first principles. Like section 10 of this Act this section can trace its origins back to the time when there was a charge to income tax under Schedule B on the occupation of land. Farming was originally charged under Schedule B. The purpose of section 53 of ICTA and its predecessor provisions was to take the charge on farming out of Schedule B and into Schedule D. With the abolition of Schedule B that function is now spent.

65.But section 53 of ICTA does make clear that even uncommercial farming is treated as a trade. This section preserves that effect.

66.Subsection (2) deals with the second function of the section. It provides that all farming carried on by a person in the United Kingdom is treated as a single trade. Farming carried on as part of another trade is not included in the single trade of farming.

67.The restriction of subsection (2) to farming in the United Kingdom is derived from the definition of “farming” in section 832(1) of ICTA.

68.Section 53(2) of ICTA uses the expression “particular person or partnership or body of persons” to make clear that the single trade rule applies also to a firm and to a body of trustees. It follows that farming carried on by a person as a member of a firm or a body of trustees is separate from any farming carried on by that person alone.

69.This section does not rewrite this rule as it applies to firms. That is dealt with in section 859 of this Act.

70.Nor does this section rewrite the reference to “body of persons” in section 53(2) of ICTA. It is generally understood that a body of persons acting as trustee, or in some other representative or fiduciary capacity, is not the same entity for tax purposes as one of those persons acting on their own behalf. So, for instance, section 15(1)1(3) of ICTA refers only to “a particular person or partnership”; there is no need to refer to a “body of persons”. Retaining a reference to a “body of persons” in this section would cast doubt on the meaning of sections where the phrase is not used.

71.The definition of “farming” and “market gardening” is in section 876 of this Act.