Taxes Consolidation Act 1997 section 656

Farming: trading stock of discontinued trade

Section 656 allows a farmer who is ceasing to trade and the successor farmer to jointly elect to value transferred farming trading stock at book value rather than market value.

• When a farmer ceases trading and transfers farming stock to another farmer, the stock would normally be valued at market value under section 89, potentially creating a significant tax charge for the retiring farmer.
• Both the transferor and the transferee may jointly elect to disapply the market value rule and instead value the stock at its book value as shown in the transferor's accounts at the date of discontinuance.
• The effect of the election is that the same book value figure is used in the accounts of both parties, eliminating the deemed profit that would otherwise arise on the transfer.
• The election must be made in writing on or before the specified return date for the chargeable period in which the stock is transferred.