Income Tax (Trading and Other Income) Act 2005 section 184

Basis of valuation of work in progress

Section 184 sets out the rules for valuing work in progress when a trade, profession or vocation ceases.

• Where work in progress is transferred for payment to someone carrying on (or intending to carry on) a UK trade, profession or vocation who can deduct its cost for tax purposes, it is valued at the actual price paid or consideration given.
• In all other cases, work in progress is valued at the amount that would have been paid between independent parties dealing at arm's length at the time of cessation.
• Unlike the rules for stock, there is no alternative to the sale price where work in progress is transferred to an eligible buyer — the cost to the purchaser is always the price paid.
• These valuation rules can be overridden if an election is made under section 185 to value work in progress at cost instead.