BIM84210 - Averaging: example of a two year claim
An artist has the following profits and would like to consider making an averaging claim.Â
| Tax Year | Profits |
|---|---|
| 2015 / 2016 | £32,000 |
| 2016 / 2017 | -£20,000 |
As long as the profits in 2016 / 2017 are either less than £24,000 or more than £42,667 then the volatility condition has been met and on the basis that all of the criteria in BIM84100 are met, then an averaging claim can be made.Â
»Ê¹ÚÌåÓýapp averaging computation will look like this.
| Tax Year | Profits | Profits for averaging | Averaged Profits |
|---|---|---|---|
| 2015 / 2016 | £32,000 | £32,000 | £16,000 |
| 2016 / 2017 | -£20,000 | £0 | £16,000 |
 So the artist’s profits for all tax purpose are now £16,000 for each year.
»Ê¹ÚÌåÓýapp artist can then claim to use the £20,000 of trade losses in the normal manner.
In this case the artist claims under S64 ITA 2007 to use the £16,000 loss against the general income of 2015/2016 and the residue of the loss, £4,000, against the general income of 2016/2017
Relief for the reduction of tax and class 4 NIC in 2015/2016 due to averaging and the reduction of tax due to the loss claim will be given in 2016/2017 and any interest on any repayment due will be given with reference to 2016/2017.