Section 178 | Sale basis of valuation: election by connected persons

(1)The value of trading stock is determined in accordance with this section if—

(a)it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes,

(b)the buyer is connected with the seller, and

(c)an election is made under this section.

(2)The parties to the sale may make an election under this section if the value of the stock determined under section 177 exceeds both—

(a)its acquisition value, and

(b)the amount in fact realised on the sale.

(3)If an election is made, the value is taken to be—

(a)its acquisition value, or,

(b)if greater, the amount in fact realised on the sale.

(4)An election under this section must be made by both parties on or before the first anniversary of the normal self-assessment filing date for the tax year in which the cessation occurred.

(5)The “acquisition value” of trading stock means the amount which would have been deductible as representing its acquisition value, in calculating the profits of the trade, on the following assumptions—

(a)that the stock had been sold in the course of the trade, immediately before the cessation, for a price equal to the value of the stock determined under section 177, and

(b)that the period for which those profits were to be calculated began immediately before the sale.

(6)If the stock is sold together with other assets, so much of the amount realised on the sale as, on a just and reasonable apportionment, is properly attributable to each asset is treated as the amount realised on the sale of that asset.