Following the herd

With increased wholesale milk prices many dairy farmers have been expanding their businesses in recent years and now have substantial herds. All of my clients are on the herd basis and the tax cost is therefore considerably lower than the current market value of the herd.

I appreciate the capital tax issues to do with incorporating farms so have always been reluctant to advise incorporation unless all of the boxes are ticked.

However as more clients are making significant profits it is now impossible to ignore this option without losing out on significant income tax savings. The general incorporation decisions processes and elections apply here and the only query relates to the herd basis.

Originally I thought that it would be possible to elect to transfer at the herd value. However ITTOIA 2005 s 127 has a provision for the “prevention of...