A farming partnership has admitted a new partner. No herd basis election currently exists.
All cattle currently sit in stock, with a cost of £60,000. The MV of the cattle is £100,000 at present.
The change of partner allows us to make a herd basis elections (ITTOIA 2005 S124(8)).
If we were to do so, does the initial transfer to the herd take place at the MV of £100,000, or the cost of £60,000.
If this was the other way around, and we were going from having made a herd basis election, to not making one when the partnership changed, then we’d bring the cattle in at MV at that point. So you’d be forgiven for assuming the reverse applies.
ITTOIA 2005 S114 (1) merely says that no deduction is allowed for the initial cost of the herd.
ITTOIA 2005 s115 suggests that no deduction is allowed for the acquisition cost of the animal, or the cost of breeding the animal (we have a mix if acquired and bred cattle).
Do we merely remove the initial costs of the herd - the £60,000?
Or is this treated as an appropriation to fixed assets under ITTOIA 2005 s172B, and so takes place at MV of £100,000?
The more I think about this I believe ITTOIA 2005 s127 comes into play and deems market value (it is only a minor partner being admitted, so the control condition would be met).
I’ll post the question anyway to see what thoughts folk may have.