Corporation Tax Act 2009 section 165

Sale basis of valuation: sale to unconnected person

Section 165 sets out how trading stock is valued when it is sold to a buyer who is not connected to the seller and who will use the stock in their own trade.

• When trading stock is sold to an unconnected person who trades (or intends to trade) in the UK and can deduct the cost of that stock as a business expense for corporation tax or income tax purposes, the value of the stock is simply the actual sale price achieved.
• The buyer must not be connected with the seller — if there is a connection between the parties, different valuation rules apply.
• Where the stock is sold as part of a bundle with other assets, the total sale price must be split on a just and reasonable basis, and the portion properly attributable to the trading stock is treated as its sale value.
• If the transfer of stock is other than by way of a sale (for example, a gift or exchange), separate rules explain how the terms used in this section should be interpreted for valuation purposes.