Corporation Tax Act 2009 section 112

Initial cost of herd and value of herd

Section 112 establishes that, where a company has elected for the herd basis, both the initial cost of acquiring the herd and the ongoing value of the herd are excluded from the calculation of trading profits.

• No deduction is allowed for the initial cost of acquiring the herd when calculating trading profits.
• The value of the herd itself is not brought into account in the profit calculation.
• This treatment reflects the principle that a production herd is treated as a fixed capital asset rather than trading stock.
• These rules apply for corporation tax purposes and correspond to equivalent income tax rules for unincorporated businesses.