669 Supplementary provisions (Chapter 2)

Summary

Measures of a technical nature are contained in section 669. These are needed to underpin the stock relief scheme. Included, for example, are provisions to ensure that stock valuations are computed on a uniform basis and that cases in which accounting periods and periods of account do not coincide are catered for.

Details

Stock valuations to be computed properly and on a uniform basis

(1)(a) An inspector is empowered to vary a claim for stock relief in whole or in part where it is considered that part or all of the increase in the value of stock has arisen by reason of acquisitions or disposals otherwise than in the normal conduct of business. The inspector can compensate for an abnormal increase or decrease by adjusting the value of the opening or closing stock to such value as appears to be just and reasonable having regard to all the circumstances of the case.

(1)(b) Where there is a change in the basis of valuation of stock, the value of the opening stock has to be recomputed on the same basis as the value of the closing stock.

Accounting period not coinciding with period of account

The situation where an accounting period does not coincide with a period of account (that is, a period for which the accounts of the person have been made up), or with 2 or more consecutive periods of account, is addressed. In such a case, the accounting period lacks a properly certified opening stock value or closing stock value or both. A period, called a reference period, is established which encompasses one or more periods of account and which, therefore, has actual opening and closing stock values. These values are used to ascertain the increase in stock value in a reference period and this increase, by means of the formula in subsection (3)(a), provides the basis for determining the increase in stock value in an accounting period for the purpose of computing a deduction under section 666.

(2)(a) Where a person’s accounting period does not coincide with a period of account or with 2 or more consecutive periods of account, the person’s increase in stock value in the accounting period is to be determined by reference to a period, referred to as “the reference period”, determined by this subsection.

(2)(b) Where the beginning of an accounting period does not coincide with the beginning of a period of account, the reference period is to begin at the beginning of the period of account which is current at the beginning of the person’s accounting period.

(2)(c) Similarly, where the end of an accounting period does not coincide with the end of a period of account, the reference period is to end at the end of the period of account which is current at the end of the person’s accounting period.

(2)(d) Where paragraph (b) does not apply, the reference period runs from the commencement date of the person’s accounting period and, where paragraph (c) does not apply, the reference period ends at the end of the person’s accounting period.

(3)(a) A formula is used to enable the increase in stock value in a reference period to be applied to an accounting period. The formula requires that the increase in stock value (C–O) in the reference period is to be multiplied by the fraction —

in order to obtain the increase in stock value appropriate to the accounting period.

(3)(b) References to closing stock value in section 666 and in the remaining provisions of the section are adapted to the concept of a reference period.

Bar on entitlement to stock relief in certain cases

(4)(a) The circumstances in which a person is not allowed a stock relief deduction under section 666 are spelt out. These are if an accounting period ends because the person ceases —

• to farm,
• to be resident in the State, or
• to be chargeable to tax on the farming profits.

(4)(b) This provision also applies to a case within subsection (3)(a).

Claims where before accounting period begins the trade was not being carried on

(5)(a) Where a person claims stock relief and immediately before the beginning of the accounting period the person was not carrying on the trade to which the claim relates, then, unless certain conditions are fulfilled, the person’s opening stock value is to be deemed to be such amount as appears to the inspector to be just and reasonable.

(5)(b) The considerations to which the inspector must have regard in so determining the person’s opening stock value are indicated, namely, all relevant circumstances of the case and in particular movements in the costs of items comprised in the trading stock and changes in the volume of trade.

(5)(d) In a case where an accounting period does not coincide with a period of account, references in paragraphs (a) to (c) to an accounting period are to be taken as references to a reference period.

Miscellaneous

(6) Finally, a reference in the section to the number of months in an accounting period or reference period is to be construed, where appropriate, as including a fraction of a month.

Relevant Date: Finance Act 2021