B2.205 Changes in trading stock
If an item of trading stock is disposed of otherwise than in the course of the trade, the amount to be brought into account as a trade receipt is the amount representing the market value of the item at the date of its disposal. This rule was embodied in statute in FA 20081 but was laid down more than 50 years earlier, in Sharkey v Wernher (see below).
FA 2008 set out the effect of 'changes in trading stock' occurring on or after 12 March 20082 on the calculation of trading profits for income tax or corporation tax purposes3.
The rules do not apply where profits are calculated on the cash basis for small businesses from 2013/14 (see B2.112)4. Instead, a just and reasonable adjustment should be made to reflect the uncommercial transaction (see B2.207A). So, for example, the cost of any such goods might be disallowed as an expense5. The rules do not apply to services rendered to the trader personally or to his household, or the value of meals provided for proprietors of hotels, boarding houses, restaurants etc and members of their families6, (see B2.315); and to expenditure incurred on the construction of an asset that is intended from the outset to be used as a fixed asset in the trade. In all these cases only the costs in question should be disallowed7.
The provisions apply to appropriations of stock to or from a trade and to other disposals not made in