Annex 1: Minor changes in the law made by the Act: Change 32: Herd basis rules: meaning of “substantial part of herd”: section 113(6) and section 120(7)
This change gives statutory effect to the practice of treating 20% of the herd as substantial.
A number of sections in the herd basis rules refer to “a substantial part of the herd” or “a substantial difference”:
	section 118(1)(b) (sale of animals from the herd);
	section 119(1) (sale of whole or substantial part of herd);
	section 120(7) (acquisition of new herd begun within 5 years of sale);
	section 122(1)(a) (replacement of part sold within 5 years of sale); and
	section 126(1)(a) (slaughter under disease control order).
What constitutes a substantial part of the herd or a substantial difference is primarily a question of fact. But this Chapter gives statutory effect to a long-standing practice set out in paragraph 55525 of the Inland Revenue’s Business Income Manual. This provides that 20% of the herd will be regarded as substantial. This does not, however, prevent a smaller percentage from being regarded as substantial.
This change is in taxpayers' favour in principle. But it is expected to have no practical effect as it is in line with current practice.