Special rules apply to farmers and market gardeners who prepare their accounts on an accruals basis. These rules cover aspects such as farmers’ averaging relief, loss handling, and compensation for compulsory slaughter.
The herd basis is one such special rule. This method allows those who keep production livestock to calculate profits or losses differently. Typically, farm animals are considered trading stock, but under the herd basis, a herd or flock of production animals is generally treated as a capital asset rather than trading stock.
Farmers wishing to use the herd basis must make an election. Once elected, the herd basis governs the calculation of farming profits for the herd or herds covered by the election, according to specific rules. This method can also apply to jointly owned animals, such as in certain share-farming arrangements.
It should be noted that these special rules do not apply to farmers and market gardeners who calculate their profits using the cash basis.
Get in touch with our accounts department to discuss further.