I am informed by the Revenue Commissioners that, in accordance with section 657 of the Taxes Consolidation Act, 1997, a full-time farmer is entitled to opt to be charged to income tax for any tax year on the average farming profits of a period of three years. This provision, usually referred to as income averaging, is designed to smooth out the effects of any unusual fluctuations in farming profits by spreading the effect over a period of three years. For example, the restriction on the movement in livestock arising from foot and mouth disease may have caused such a fluctuation in some cases, depending on the farmers' accounts at the end of the year and the normal pattern of selling and restocking. In such cases the option of income averaging is open to the farmers in question, which will ensure that any excess profits are spread over a period of three years.
I would add that in the Finance Act, 2002, changes were made to the existing special tax treatment under section 668 of the Taxes Consolidation Act, 1997, for profits arising from the disposal of livestock due to disease eradication measures, including foot and mouth measures. The period over which a farmer may spread the profit arising from such a disposal, which arises on or after 21 February 2001, was extended from two years to four years. Moreover, under the section a farmer is deemed to be entitled to stock relief equal to the profit assessed, provided he or she reinvests, before the end of the four year period, not less than the amount of compensation which was received on the disposal.