Income Tax (Trading and Other Income) Act 2005 section 176

Sale basis of valuation: sale to unconnected person

Section 176 establishes how trading stock should be valued when it is sold to an unconnected person who trades or intends to trade in the UK.

• The rule applies where stock is sold to a UK trader (or intended trader) who can deduct the cost of that stock as a business expense for income tax or corporation tax purposes, and the buyer is not connected with the seller.
• The value of the trading stock is simply the actual sale price received — there is no need for a separate market value or other notional valuation.
• Where the stock is sold as part of a bundle with other assets, the total sale proceeds must be split on a just and reasonable basis, and only the portion properly attributable to the stock is treated as the stock's sale value.
• If the transfer of stock is not a sale but some other form of transfer, section 181 provides guidance on how the terms used in this section should be interpreted in that context.