Commentary

B5.153 Effect of the herd basis

Business tax
Business tax | Commentary

B5.153 Effect of the herd basis

Business tax | Commentary

B5.153 Effect of the herd basis

Initial cost

The initial cost of the herd is not deductible in arriving at the computation of taxable profits. Additions are not deductible and the value is not brought to account1.

Additions

When an animal is added by transfer from trading stock, there is included, as a trading receipt, the cost of acquisition and rearing, or breeding and rearing2. Where actual cost cannot be determined, the 'deemed' cost basis may be used3. The object of this adjustment is to compensate for whatever past deductions have been allowed in respect of that particular animal. Animals acquired by gift are treated as acquired at market value.

Replacements

When a herd animal dies or ceases to form part of the herd, and is replaced by another animal, the proceeds of sale of the old animal are included as a trading receipt; and the cost of the animal which replaces it is deductible as a trading expense. However, if the cost of the replacement has already been deducted, because it is home bred, etc no further deduction is due. If the replacement beast is of better quality than that replaced, the additional cost reflecting the element of improvement is not deductible4.

There is no statutory time limit within

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