Stock: non-trading transactions in stock: sales/purchases not at market value
Transactions that are not genuine commercial transactions
Where stock-in-trade is purchased and the transaction cannot be regarded as illusory, colourable or fraudulent the tax deduction for the purchases should, as a general rule, be the actual cost even though the price agreed does not represent market value (see Craddock v Zevo Finance Co Ltd  27TC267, and Jacgilden (Weston Hall) Ltd v Castle  45TC685). Where on the other hand the purchase is not a genuine commercial transaction market value may be substituted (Ridge Securities Ltd v CIR  44TC373). See also the judgment of Lord Cross of Chelsea in Kilmorie (Aldridge) Ltd v Dickinson  50TC100.
Similarly where sales are at a gross under-value, it is open to the Tribunal and the courts to find that the transactions are not made in the course of trade and that the open market value should be substituted for the sale price in computing the profits for tax purposes, (see Petrotim Securities Ltd v Ayres  41TC389 and Skinner v Berry Head Lands Ltd  46TC377). This is a development of the principle established in Sharkey v Wernher  36TC275 (BIM33630) in relation to stock disposed of by a trader other than by way of sale in the course of trade.
As regards sales etc between associated persons (Pt 4 Taxation (International and Other Provisions) Act 2010) see INTM410000 onwards. For the deduction available in respect of the transfer of assets to employees at undervalue, see also BIM47110.