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Connected party disposals

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance

Connected party disposals

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance
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This note explains the general rules that apply in respect of the disposal of company assets to connected parties and highlights the issues that differ from a transaction between unconnected third parties. For an overview of corporate capital gains see the Corporate capital gains ― overview guidance note.

Generally, disposals between connected parties are deemed to take place at market value, regardless of any actual consideration paid or received. However, in certain circumstances which are discussed below, there may be an adjustment to the base cost of the shares.

See also Simon’s Taxes C2.109 onwards.

What are connected parties?

A company is connected with another company if:

  1. •

    the same person or group of persons control both companies

  2. •

    a person controls one company and persons connected with them control the other

  3. •

    a person controls one company and they, along with other persons connected with them, control the other

TCGA 1992, s 286(5)

A company is connected with another person if that person controls it alone or alongside persons connected with them.

Where two

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