Finance Act 1947

3(1)Where an election for the herd basis has effect, the consequences for the relevant tax purposes shall be as provided by the subsequent provisions of this paragraph.

(2)The initial cost of the herd and, subject to the provisions of this paragraph as to replacements, the cost of any animal added to the herd, shall not be deducted as an expense, and the value of the herd shall not be brought into account.

(3)Where an animal which has theretofore been treated as part of the trading stock of the farmer is added to the herd otherwise than by way of replacement, there shall be included as a trading receipt—

(a)in the case of an animal bred by the farmer, a sum equal to the cost of breeding it and rearing it to maturity ; and

(b)in any other case, a sum equal to the initial cost to the fanner of acquiring the animal, together with any cost incurred by him in rearing it to maturity.

(4)Where an animal forming part of the herd dies or ceases to form part thereof and is replaced therein by another animal, any proceeds of sale of the animal which dies or ceases to form part of the herd shall be included as a trading receipt, and the cost of the animal which replaces it, except in so far as that cost consists of such costs as are allowable apart from the provisions of this Schedule as deductions in computing profits or gains of farming for the purposes of assessments under Case I of Schedule D, shall be deducted as an expense :

Provided that—

(a)where the second-mentioned animal is of better quality than the animal which it replaces, the amount deducted shall not exceed the amount which it would have been necessary to expend in order to acquire an animal of the same quality as the animal which is replaced; and

(b)where the animal which is replaced was slaughtered by the order of any Ministry, Government department or local or public authority under the law relating to diseases of animals, and the animal which replaces it is of worse quality, the amount included as a trading receipt shall not exceed the amount allowable as a deduction.

(5)Where the herd is sold as a whole and another production herd of the same class is acquired, the preceding provisions of this paragraph shall apply as though there had been sold from the original herd, and replaced therein, a number of animals equal to the number in the original herd or in the newly acquired herd, whichever is the less.

(6)If (either all at once or over a period not exceeding twelve months) either—

(a)the whole of a herd is sold in circumstances in which the last preceding sub-paragraph does not apply ; or

(b)a part of a herd is sold on a substantial reduction being made in the number of animals in the herd,

any profit or loss arising from the " transaction shall not be taken into account:

Provided that where, within five years of the sale, the seller acquires or begins to acquire another production herd of the class in question or, as the case may be, he acquires or begins to acquire animals to replace the part of the herd in question—

(i)the provisions of the two last preceding sub-paragraphs shall apply to the acquisition or replacement, except that if the sale was one which the seller was compelled to effect by causes wholly beyond his control the amount included as a trading receipt in respect of any animal sold which is replaced by an animal of worse quality shall not exceed the amount allowable as a deduction in respect of the said animal of worse quality ; and

(ii)for the purposes of the application of those sub-paragraphs, the proceeds of sale of the animals comprised in the original herd or part of a herd shall be brought into account as if they had been respectively received at the times of the corresponding acquisitions.

(7)If an animal forming part of the herd is sold and none of the three last preceding sub-paragraphs applies, any profit or loss arising from the transaction shall be included or deducted, as the case may be ; and for the purposes of this sub-paragraph the said profit or loss shall be computed by comparing—

(a)in the case of an animal bred by the farmer, the cost of breeding it and rearing it to maturity; and

(b)in any "other case, a sum equal to the initial cost to the farmer of acquiring the animal (or, in the case of an animal acquired otherwise than for valuable consideration, its market value when it was acquired by the farmer) together, in both cases, with any cost incurred by him in rearing it to maturity,

with the proceeds of the sale.

(8)Where the herd is sold as a whole, and another production herd of the same class is acquired, and the number of animals in the newly acquired herd is less than the number in the original herd, and the difference is not substantial, sub-paragraph (6) of this paragraph shall not apply, and; the last preceding sub-paragraph shall apply to a number of animals in the original herd equal to the difference.

(9)The preceding provisions of this paragraph shall apply in relation to the death or destruction of animals-as they apply in relation to the sale of animals, as if any insurance or compensation moneys received by reason of the death or destruction thereof were proceeds of sale, and any references in this paragraph to the proceeds of sale of an animal include references to any proceeds of sale of its carcase or any part thereof.