Part 4: Income tax, corporation tax and capital gains tax Section 41: Valuation of trading stock on cessation Background note
When a business ceases, it is necessary to bring into account a value for the remaining trading stock in computing the profit or loss of the business. There are different bases for calculating the value depending on what happens to the trading stock. Those rules are contained in sections 163 to 167 of CTA 2009 (for corporation tax), and in sections 173 to 178 of ITTOIA 2005 (for income tax).
	It is also possible that the transfer pricing rules in Part 4 of TIOPA could apply to the value of the trading stock on cessation. The outcome reached under transfer pricing could be lower than the value that would be given by the CTA 2009 or ITTOIA 2005 rules. However, because the transfer pricing rules apply, the rules in CTA 2009 and ITTOIA 2005 are prevented from applying. The result is that the full value might not be brought into account for tax because of the way the transaction is treated in the accounts.
	This change ensures that where the transfer pricing rules of TIOPA apply, an adjustment or further adjustment can also be made under section 162 of CTA 2009 or section 173 of ITTOIA 2005 to ensure that not less than the full value of trading stock is brought into account on the cessation of a trade.
	Similar changes are made by section 40 in connection with trading stock transferred otherwise than at arm's length, and by section 42 in connection with transfers of intangible fixed assets.