Income Tax (Trading and Other Income) Act 2005 section 111A

Herd basis rules not to apply where cash basis used

Section 111A disapplies the herd basis rules for trades that use the cash basis of accounting.

• The herd basis is a special set of rules for valuing production animals (such as cattle, sheep or pigs) held as trading stock
• These herd basis rules do not apply at all when a trade calculates its profits using the cash basis
• The cash basis records income when received and expenses when paid, rather than using accruals accounting
• Traders using the cash basis must therefore account for animals bought and sold simply as cash receipts and payments, without applying the herd basis valuation rules