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HMRC internal manual

Business Income Manual

Farming: stud farms: studs farms on the herd basis

S111-S129 Income Tax (Trading and Other Income) Tax 2005, S109-S127 Corporation Tax Act 2009

The herd basis applies to horses as it does to other production animals but, because of the economics of the industry, elections are unusual. Any election for the herd basis in a case in which the progeny is not wholly or mainly for sale (transfers from stud to training not being regarded for this purpose as sales) should be submitted to Business Profits. Where an election for the herd basis is accepted, the guidance at BIM55500 onwards applies. The following points should be noted:

  • All immature stock should continue to be dealt with as stock in trade. Transfers of immature stock from or to training should be dealt with in accordance with BIM55715.
  • Where exceptionally a mature animal is put into training, adjustments should be made as though at the time of transfer it had been sold from the herd at its then market value (see BIM55535 and BIM55550).
  • If a mature animal is returned to stud after racing, its cost price for the purposes of the herd basis should be taken to be its market value at the time of return (see BIM55530 and BIM55535).

See BIM55705 as regards open market valuations.