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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Farming: herd basis: tax avoidance: transfers not at market price

S127 Income Tax (Trading and Other Income) Act 2005, S995 Income Tax Act 2007 (ITA 2007), S125 Corporation Tax Act 2009 (CTA 2009), S1124 Corporation Tax Act 2010

There are anti-avoidance provisions to prevent abuse of the herd basis rules. The provisions are aimed at the transfer of production herds, or of animals forming part of such herds, otherwise than by sale at the market price. The broad effect of the provisions is to require that the transfer is to be treated for taxation purposes as though made at market price if one of the following conditions apply:

  • one of the parties to the transfer is a body of persons, including a partnership, under the control of the other (or both are bodies of persons under the control of a third person),
  • it appears that the main benefit, or one of the main benefits, which might have been expected from the transaction was a benefit derived from the effect, or the cessation of the effect, of an election, or the acquisition of a fresh right of election.

The provisions apply whether or not any of the parties had, at the time, already made an election. The expression ‘control’ has the same meaning as in S995 ITA 2007 for individuals and S1124 CTA 2009 for companies.