BIM84130 - Averaging: when profits can be averaged

S222, S222A Income Tax (Trading and Other Income) Act 2005

Two-Year averaging聽

A claim be made if the profits of one year are less than 75% of the profits of the other year, or, the profits of one (but not both) of聽the tax years are nil.聽聽

Five-Year averaging

A claim can be made if the volatility condition is met.

The volatility condition is that either:

  1. One of the following is less than 75% of the other:
    • the average of the profits for the first聽four tax years
    • the profits of the last of the tax years; or
  2. The profits of one or more聽(but not all) of聽the tax years are nil.聽聽
Trading losses

A trading loss is treated as a nil profit for averaging purposes. This enables the loss relief to be claimed under the normal rules without the measure of the loss available for relief being affected by averaging.

Examples

Examples of these computations and other aspects of averaging are included聽from聽BIM84210 辞苍飞补谤诲蝉.听