Income Tax (Trading and Other Income) Act 2005 section 175

Basis of valuation of trading stock

Section 175 sets out how trading stock is to be valued when a trade ceases, depending on who the stock is sold to and the circumstances of the sale.

• When a trade ceases, any remaining trading stock must be valued at that point for tax purposes
• If the stock is sold to a UK trader (or someone intending to trade) who can deduct the cost as a business expense, specific valuation rules under sections 176, 177 or 178 apply depending on whether the buyer is connected or unconnected
• Where the anti-avoidance rule in section 127 applies (preventing abuse of the herd basis rules for animals), the stock is instead valued at the open market price the animals would have fetched at the time of sale
• In all other cases — for example where the stock is not sold to another trader — the value is taken to be the open market price at the date the trade ceased