Corporation Tax Act 2009 section 167

Sale basis of valuation: election by connected persons

Section 167 allows connected parties to elect to use the actual sale price (or acquisition value) of trading stock instead of the arm's length value that would otherwise apply under section 166 when a trade ceases.

• When trading stock is sold to a connected person who can deduct its cost for tax purposes, both parties may jointly elect to override the arm's length valuation that would normally apply under section 166.
• The election is only available where the arm's length value exceeds both the stock's acquisition value (effectively its book value in the seller's hands) and the actual price paid — the stock is then valued at the higher of acquisition value or actual sale price.
• Both parties must make the election within two years of the end of the accounting period in which the trade ceased.
• Where trading stock is sold as part of a bundle with other assets, the total sale proceeds must be apportioned on a just and reasonable basis to determine the amount attributable to the stock.