Commentary on Sections Overview Overview Section 127: Preventing abuse of the herd basis rules
525.This section provides anti-avoidance rules that may apply if a farmer transfers the whole or part of a production herd in a transaction that is not an open market sale. It is based on paragraph 5 of Schedule 5 to ICTA.
526.Subsection (1) sets out the conditions for the section to apply. If the transfer is not an open market sale the section will apply if either the “control condition” or the “herd basis benefit condition” are met.
527.Subsection (2) defines the relationship that must exist between the parties to the transfer for the “control condition” to apply.
528.Subsection (4) sets out the conditions for the “herd basis benefit condition” to apply.
529.Subsection (6) gives the counter-action that applies if either the “control condition” or the “herd basis benefit condition” are met. The animals are treated as sold at their open market value. Section 175(3) in Chapter 12 of Part 2 of this Act (trade profits: valuation of stock and work in progress) makes clear that this section takes priority over the provisions of that Chapter.