Income Tax (Trading and Other Income) Act 2005 section 119

Sale of whole or substantial part of herd

Section 119 deals with the tax treatment of profits and losses when a farmer sells the whole herd, or a substantial part of it, within a 12-month period under the herd basis rules.

• Where the whole herd or a substantial part is sold within 12 months, any profit from the sale is not taxable as a trading receipt
• Equally, no deduction is allowed for any loss arising from such a sale
• This rule does not apply if the farmer begins acquiring a new herd within five years of the sale (section 120) or begins replacing the part sold within five years (section 122)
• The five-year new herd exception is itself subject to conditions in section 120(5), which can cause the general rule in this section to apply instead