Income Tax (Trading and Other Income) Act 2005 section 121

Section 120: sale for reasons outside farmer's control

Section 121 limits the taxable trade receipt when a farmer who was compelled to sell a herd for reasons beyond their control replaces animals with ones of worse quality under the herd basis rules.

• Where a farmer was forced to sell the old herd for reasons entirely outside their control and a replacement animal is of worse quality than the animal it replaces, the amount taxed as a trade receipt is capped at the "equivalent amount" for the new animal
• If the replacement animal came from the farmer's own trading stock and was bred by the farmer, the equivalent amount is the cost of breeding and rearing the animal to maturity
• If the replacement animal came from trading stock but was not bred by the farmer, the equivalent amount is the initial acquisition cost plus any rearing costs to maturity
• If the replacement animal was not part of the farmer's trading stock before joining the herd, the equivalent amount is simply the purchase cost of the new animal

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