28(1)Subject to the provisions of this paragraph and of paragraphs 29 and 30 below, in this Schedule " trading stock " means property of any description, whether real or personal, being either—
(a)property such as is sold in the ordinary course of the trade in question, or would be sold if it were mature or if its manufacture, preparation or construction were complete; or
(b)materials such as are used in the manufacture, preparation or construction of any such property as is referred to in paragraph (a) above,
and includes work in progress.
(2)Sub-paragraph (1) above does not apply to—
(a)securities (which for this purpose includes stocks and shares); or
(b)land, other than such as is ordinarily sold in the course of the trade only—
(i)after being developed by the person carrying on the trade, or
(ii)in the case of a company which is a member of a group, for the purpose of being developed by another company in that group; or
(c)goods which the person carrying on the trade has let on hire or hire-purchase.
(3)In sub-paragraph (2) above, references to development are, in relation to land other than a building, references to the construction or substantial reconstruction of buildings on the land and, in relation to a building, references to its construction or substantial reconstruction and "group" shall be construed in accordance with section 272 of the Taxes Act.
(4)For the purposes of this Schedule the value of a person's trading stock at any time shall be reduced to the extent to which payments on account have been made at or before that time in respect of that stock.
(5)References in this Schedule to trading stock are to the trading stock brought into account in computing the profits or gains of a trade in accordance with Case I of Schedule D.
(6)Where a person not resident in the United Kingdom carries on a trade partly within the United Kingdom and partly abroad, references in this Schedule to his trading stock are to the stock attributable to that part of the trade within the charge to United Kingdom tax.
29(1)For the purpose of determining under this Schedule whether any property is a person's trading stock anything which—
(a)is used by a person ("the contractor") in carrying out, or results from the carrying out by him of, a contract for the manufacture, preparation or construction of any property ; and
(b)by virtue of a provision in the contract or of any rule of law vests in the other party to the contract before the contract has been fully performed by the contractor;
shall, until the contract has been so performed, be treated as belonging to the contractor, and, subject to sub-paragraph (2) below, as not belonging to the other party.
(2)Where the value of any property treated as belonging to the contractor by virtue of sub-paragraph (1) above falls to be reduced under paragraph 28(4) above by reference to payments made by the other party, sub-paragraph (1) above shall not preclude the property being treated, at a value equal to the payments, as belonging to the other party.
(3)For the purpose of determining under this Schedule whether any property is a person's trading stock any goods which—
(a)have been sold to a person subject to a condition reserving ownership to the seller pending full payment by that person ; but
(b)are treated in the accounts of the seller as sold and in the accounts of the person mentioned in paragraph (a) above as bought,
shall be treated as belonging to that person and not to the seller.
30(1)In relation to relief in respect of any period of account beginning on or before 26th March 1980 "trading stock" shall include any assets which by virtue of paragraph 7 of Schedule 7 to the [1980 c. 48.] Finance Act 1980 were disqualified from being trading stock in relation to any period of account beginning after that date.
(2)In relation to unrecovered past relief attributable to such assets—
(a)paragraphs 20 and 21 above shall not displace the operation of any charge under paragraph 4 or 13 above ; and
(b)references in paragraphs 4(4) and 13(3) above to unrecovered past relief shall apply as in the case of other unrecovered past relief.
(3)For the purposes of sub-paragraph (2) above the unrecovered past relief at the beginning of the first period of account beginning after 26th March 1980 shall be apportioned between such assets as are mentioned in sub-paragraph (1) above and other stock by reference to their respective values at the beginning of that period.