伊人直播

In a situation where the option to elect for averaging was not exercised and the profits for both or either of the years are amended, for any reason other than the making of an averaging claim, say after an enquiry, the impact of a subsequent averaging claim is restricted to the amount of the adjustment to the profits.

If additions to returns are established but the time limit for making an election has passed, a late election should be admitted, but as demonstrated in the example below its effect is restricted to the amount of the additions.

Example

Julie, a pedigree Texel sheep breeder did not claim averaging for 2008-09 and 2007-08. An enquiry results, in 2012, in the addition of 拢10,000 to her profits for 2008-09 which makes her liable to higher rate tax. She claims averaging. The effect is as follows:

听	2007-08	2008-09	Totals
听	听	听	听
Declared profits	拢16,000	拢30,000	拢46,000
Additions	听	拢10,000	听
Revised profits	拢16,000	拢40,000	拢56,000
Averaged profits	拢28,000	拢28,000	拢56,000

Averaging cannot reduce the profit for the later year below 拢30,000, the amount originally declared. Strictly the adjustment in terms of tax based on the circumstances of the earlier year should nonetheless be computed by reference to additional profits of 拢12,000 (拢28,000 - 拢16,000). By concession the adjustment in terms of tax applied to the 2008-09 return, is based on additional profits of 拢10,000 for 2007-08 rather than 拢12,000.

Had the figures for the two years been reversed the same principle would have applied with the following result:

听	2007-08	2008-09	Totals
听	听	听	听
Declared profits	拢30,000	拢16,000	拢46,000
Additions	拢10,000	听	听
Revised profits	拢40,000	拢16,000	拢56,000
Averaged profits	拢28,000	拢28,000	拢56,000

Without a restriction the adjustment in terms of tax to 2008-09 based on the circumstances of the earlier year would have been tax on profits of 拢40,000 less tax on profits of 拢28,000.

But that would involve opening the figures originally returned, so the 拢30,000 originally returned is used instead of 拢28,000 and the addition for 2008-09 is restricted to 拢10,000.

See BIM84145 for a detailed example of computing a giving the tax adjustment.