Part 4: Income tax, corporation tax and capital gains tax Section 40: Changes in trading stock not made in course of trade Details of the section
Section 40 amends section 161 of the Corporation Tax Act 2009 (CTA 2009) and section 172F of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005.
	Subsection (1) inserts new subsections (1A), (1B) and (1C) into section 161 of CTA 2009.
	New subsection (1A) of section 161 of CTA 2009 ensures that, where the transfer pricing rules of Part 4 of the Taxation (International and Other Provisions) Act (TIOPA) 2010 apply, there can also be an adjustment or further adjustment under section 161. This is to ensure that the minimum amount to be brought into account for the acquisition or disposal of the trading stock in computing profits for corporation tax purposes is the market value. The subsection compares the market value amount that should be recognised for the acquisition or disposal with the amount actually recognised for the acquisition or disposal, having applied the transfer pricing rules. If the market value amount is the higher of the two amounts, subsection (1B) then applies.
	New subsection (1B) of section 161 of CTA 2009 directs that, if the market value amount is greater than the transfer pricing amount, a further adjustment is made to ensure that the amount recognised for tax purposes in respect of the acquisition or disposal is the market value.
	New subsection (1C) of section 161 of CTA 2009 defines the two key amounts - the market value amount, and the amount brought into account after the application of Part 4 of TIOPA 2010.
	Subsection (2) inserts new subsections (1A), (1B) and (1C) into section 172F of ITTOIA 2005, to achieve the same effect for income tax as the new subsections (1A), (1B) and (1C) of section 161 of CTA 2009 have for corporation tax.
	Subsection (3) sets out the commencement rule. The changes have effect for acquisitions or disposals made on or after 8 July 2015, unless they were made to meet an obligation, under a contract, which was unconditional before 8 July 2015.
	Subsection (4) defines when a contract is unconditional for the purposes of the commencement rule in subsection (3).