Income Tax (Trading and Other Income) Act 2005 section 173

Valuation of trading stock on cessation

Section 173 sets out the rules for valuing trading stock when a person permanently ceases to carry on a trade, including how transfer pricing provisions interact with the valuation requirements, and the exceptions that apply for partnership changes and death.

• When a trade permanently ceases, trading stock must be valued in accordance with the specific valuation rules in sections 175 to 178 for the purpose of calculating the trade's final profits
• If HMRC's transfer pricing rules under TIOPA 2010 already apply to a provision affecting the stock in connection with the cessation, the normal stock valuation rules in this chapter do not apply — but if market value exceeds the transfer pricing amount, the excess must also be brought into the profit calculation
• No stock valuation is required under this chapter where there is a change in the persons carrying on the trade, provided at least one person who was carrying on the trade before the change continues to do so afterwards (relevant to partnerships)
• No stock valuation is required under this chapter if the cessation of the trade is caused by the death of a sole trader