Annex 1: Minor Changes in the Law Change 30: Trading income: herd basis rules: meaning of “substantial part of herd”: section 111 and section 118
This change gives statutory effect to the practice of treating 20% of the herd as substantial.
It brings the income tax and corporation tax codes back into line.
A number of sections in the herd basis rules refer to “a substantial part of the herd”.
	section 116(1) (sale of animals from herd);
	section 117(1) (sale of whole or substantial part of herd);
	section 118(4) and (5) (acquisition of new herd begun within five years of sale);
	section 120(1) (replacement of part sold within five years of sale); and
	section 124(1) (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 change gives statutory effect to a long-standing practice set out in paragraph 55525 of the HMRC 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 assists taxpayers because it provides for certainty and uniformity. It grants relief in circumstances where the test in the source legislation (evaluation of all the facts) might have been denied.
This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with generally accepted practice.