What is the herd basis?

  • The herd basis treats animals (i.e dairy, ewe flocks, pigs, poultry and thoroughbred horses) kept for production/reproduction in the same way as any other plant or machinery.
  • The farmer must elect for it and once applied the initial cost of the herd is not deductible in arriving at the taxable profit.
  • When the herd is sold however, any profit or loss is not included in the profit calculation because the original cost was not deducted.
  • Adjustments are obviously made on an annual basis to reflect any additions or disposals.

Deciding whether to elect?

  • The larger the herd, the more important the question of the election may be. Also if pedigree animals are involved values will make any decisions more important.
  • The stage of career of the individual farmer (although a farmer never retires!) may be relevant.  If likely to sell up in future and values are likely to increase the herd basis could be very attractive.
  • Problems arise when share farmers seek to elect for the herd basis.
  • If there is an ownership change, a fresh herd basis election is required.

The herd basis offers potential for tax free profits in the future, but does carry risk so important consideration should be given when deciding whether to elect the herd basis.

For more information please contact:

Jonathan Crowther FCA or Sophie Howard ACA at

Pershore (01386 552644) or Ledbury (01531 631500)

Email: farming@crowther.co.uk