SolvedBIM84230 | Averaging: example of amendments to profits following averaging
From HM Revenue & Customs · Business Income Manual
Using the example in BIM84220 the farmer realises after submitting their 2016/2017 tax return and making the averaging claim, that they have inadvertently left £2,000 of profits off that return.
The farmer is within the time limit to amend their 2016/2017 tax return and duly does so.
The amendment cancels the averaging claim and the farmer will, if they still want to, be able to make a fresh averaging claim.
The farmer computes that all of the tests are still met and makes a fresh claim. The computation now looks something like this.
| Tax Year | Profits | Averaged Profits |
|---|---|---|
| 2012/2013 | £12,000 | £19,200 |
| 2013/2014 | £12,000 | £19,200 |
| 2014/2015 | £10,000 | £19,200 |
| 2015/2016 | £10,000 | £19,200 |
| 2016/2017 | £52,000 | £19,200 |
The farmer will then need to compute the increase in tax and class 4 NIC on an increase in profits of £400 for each of the five years (£19,200 less £18,800) and pay that as part of their amended 2016/2017 self-assessment.