Income Tax (Trading and Other Income) Act 2005 section 116

Replacement of animals in herd

Section 116 deals with how to calculate trade profits when an animal leaves the herd and is replaced by another animal under the herd basis rules.

• Any sale proceeds from the departing animal must be brought into account as a trading receipt, subject to certain exceptions for disease slaughter, new herd acquisition within five years, or replacement of a substantial part sold within five years.
• The cost of the replacement animal is allowed as a deduction, provided that costs already allowed elsewhere (for example, where the replacement came from trading stock) are not claimed twice.
• Where the replacement animal is of better quality than the one it replaces, the deduction is capped at the cost of replacing with an animal of the same quality as the old one.
• Three specific exceptions may modify the basic receipt rule: slaughter under a disease control order (section 117), acquisition of a new herd begun within five years of sale (section 120), and replacement of a substantial part of the herd begun within five years of sale (section 122).