Part 3

Trading income
Chapter 8

Trade profits: herd basis rules

The herd basis rules

Section 118: sale for reasons outside farmer's control
119
1
This section applies for the purposes of section 114, as applied by section 118(2).
2
If—
a
the farmer was compelled to sell the old herd for reasons wholly outside the farmer's control, and
b
an animal (“the new animal”) that is treated as a result of section 118(2) as if it replaced an animal sold (“the old animal”) is of worse quality than the old animal,
the amount brought into account as a receipt under section 114 must not exceed the equivalent amount for the new animal.
3
If, immediately before it was added to the herd, the new animal was part of the farmer's trading stock, “the equivalent amount for the new animal” means—
a
in the case of an animal bred by the farmer, the cost of breeding the animal and rearing it to maturity, and
b
in any other case, the sum of the initial cost of acquiring the animal and the cost (if any) incurred by the farmer in rearing the animal to maturity.
4
Otherwise “the equivalent amount for the new animal” means the cost of the new animal.
Pt. 3 modified (1.1.2010) by Northern Rock plc (Tax Consequences) Regulations 2009 (S.I. 2009/3227), regs. 1, 4(1)