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HMRC internal manual

Business Income Manual

Stock: valuation on discontinuance of business: death of individual

SS173(4), 182(3) Income Tax (Trading and Other Income) Act 2005

There is an exception from the general rules on stock valuation where a sole trader dies. In those circumstances the closing value of stock or work in progress is the lower of cost or net realisable value.

Where a sole trader dies and trading is subsequently carried on by the executors, the valuation of trading stock which passes to the executors is its market value (that is, the value accepted for Inheritance Tax purposes), although the stocks were valued at cost at the date of death of the deceased. Similarly, where in such a case the business passes direct to a beneficiary, the opening valuation of the trading stock in their hands may be accepted at market value.

When the executors cease to trade the normal stock valuation rules apply.

These rules apply equally to individuals who carry on a profession or vocation.