Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Herd basis election

26 February 2013
Issue: 4392 / Categories: Forum & Feedback , Business

On a change in the members of a farming partnership, a new opportunity arises to elect for the herd basis to apply to farm animals, but there appears to be confusion about the valuation of the herd at transfer

A genuine change of members in a farming partnership provides a fresh opportunity for the “new” farmer to elect for the herd basis to apply in relation to the mature production animals.

However my query concerns whether they should be transferred at cost or market value for tax purposes. If it is the latter a paper profit is likely to arise but I can find no specific HMRC guidance on this point.

For general income tax purposes a change in the constitution in a partnership is not a cessation and commencement as long as there is a common partner before and after. This leads me to conclude that a herd-basis election would involve an appropriation from trading stock at market value.

However animals joining the herd at maturity are accounted for at cost under the herd basis. Also an election is available where the...

Only subscribers may read the full article

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.
Once you have registered, you will receive an email directing you back to read this item in full.
back to top icon