669I Provisions as to deductions.
(1) Where any person acquires ownership or part-ownership of a stallion, the profits or gains in relation to which are chargeable in accordance with section 669H(2), then that person, in computing the amount of income to be charged to tax under the Tax Acts for any chargeable period, shall not be entitled, other than in accordance with subsection (2), to any deduction in respect of expenditure incurred on such acquisition.
(2) (a) Where the profits or gains referred to in subsection (1) are chargeable in accordance with section 669H(2)(a), for each of 4 consecutive chargeable periods, the first of which begins with the chargeable period in which—
(i) 1 August 2008 occurs, in a case where the stallion is owned or part-owned on that day, or
(ii) in any other case, the stallion is either acquired for, or appropriated to, stud activities, as the case may be,
the owner or part-owner of the stallion shall, in computing for the purposes of tax the trading income of the trade of farming referred to in that section, be entitled to a deduction under this section equal to 25 per cent of the initial value of the stallion, as if the deduction were a trading expense incurred in the chargeable period.
(b) Subject to section 669K(3), where the profits or gains referred to in subsection (1) are chargeable in accordance with section 669H(2)(b), in determining the amount of income to be charged to tax under Case IV of Schedule D, such income shall be computed in accordance with the provisions applicable to Case I of Schedule D, taking into account this Chapter.
(3) Where, in any chargeable period a stallion to which this Chapter applies is disposed of or dies, then—
(a) no deduction which would otherwise be allowed under subsection (2)(a) or (2)(b), as the case may be, in respect of the initial value of that stallion shall be allowed for that chargeable period or for any subsequent chargeable period,
(b) a deduction of an amount equal to the residual value of the stallion at the time of its disposal or death shall be allowed for that chargeable period as if it were a deduction under subsection (2)(a), and
(c) the owner or part-owner of the stallion shall be chargeable to income tax or corporation tax, as the case may be, on—
(i) the amount received in money or money’s worth, in respect of its disposal or death, or
(ii) in the case of a disposal, if greater, the price which the stallion might reasonably have been expected to fetch at the time of its disposal on a sale, at arm’s length between persons who are not connected (within the meaning of section 10), in the open market.