Section 62 Transactions between connected persons.
United Kingdom
This section shall apply where a person acquires an asset and the person making the disposal is connected with him.
Without prejudice to the generality of F1section 29A(1) above the person acquiring the asset and the person making the disposal shall be treated as parties to a transaction otherwise than by way of a bargain made at arm’s length.
If on the disposal a loss accrues to the person making the disposal, it shall not be deductible except from a chargeable gain accruing to him on some other disposal of an asset to the person acquiring the asset mentioned in subsection (1) above, being a disposal made at a time when they are connected persons:
Provided that this subsection shall not apply to a disposal by way of gift in settlement if the gift and the income from it is wholly or primarily applicable for educational, cultural or recreational purposes, and the persons benefiting from the application for those purposes are confined to members of an association of persons for whose benefit the gift was made, not being persons all or most of whom are connected persons.
Where the asset mentioned in subsection (1) above is an option to enter into a sale or other transaction given by the person making the disposal a loss accruing to the person acquiring the asset shall not be an allowable loss unless it accrues on a disposal of the option at arm’s length to a person who is not connected with him.
In a case where the asset mentioned in subsection (1) above is subject to any right or restriction enforceable by the person making the disposal, or by a person connected with him, then where the amount of the consideration for the acquisition is, in accordance with subsection (2) above, deemed to be equal to the market value of the asset) that market value shall be—
what its market value would be if not subject to the right or restriction, minus—
the market value of the right or restriction or the amount by which its extinction would enhance the value of the asset to its owner, whichever is the less:
Provided that if the right or restriction is of such a nature that its enforcement would or might effectively destroy or substantially impair the value of the asset without bringing any countervailing advantage either to the person making the disposal or a person connected with him or is an option or other right to acquire the asset or, in the case of incorporeal property, is a right to extinguish the asset in the hands of the person giving the consideration by forfeiture or merger or otherwise, that market value of the asset shall be determined, and the amount of the gain accruing on the disposal shall be computed, as if the right or restriction did not exist.
Subsection (5) above shall not apply to a right of forfeiture or other right exercisable on breach of a covenant contained in a lease of land or other property, and shall not apply to any right or restriction under a mortgage or other charge.
Annotations
Textual amendments
- F1
Words substituted by Finance Act 1981 (c. 35, SIF 63:2), s. 90(3) in relation to acquisitions and disposals on or after 10 March 1981
Modifications
- C1
See Finance (No. 2) Act 1987 (c. 51), s. 74(6) and Sch. 5 para. 8(2)
- C2
Notes on the whole Act
Textual amendments
- F1
Act repealed (6.3.1992 with effect as mentioned in s. 289(1)(2) of the repealing Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch.12 (with s. 201(3), Sch. 11 paras. 20, 22, 26(2), 27 and with saving in Sch. 11 para. 24(2)) and subject to an amendment (prosp.) by Museum and Galleries Act 1992 (c. 44), s. 11(2), Sch. 8 Pt. I para. 1(1)(2)(7), and amendments by: Disability Living Allowance and Disability Working Allowance Act 1991 (c. 21), s. 4(2), Sch. 2 para. 9(1)(2) (in force 6.4.1992 by S.I. 1991/2617, art. 2(f)); S.I. 1991/2874, art. 2 (in force 6.4.1992 by S.R. 1992/94, art. 2); Social Security (Consequential Provisions) Act 1992 (c. 6), s. 4, Sch. 2 para. 52(a)(b) (in force 1.7.1992 by s. 7(2) of the amending Act); Social Security (Consequential Provisions) (Northern Ireland) Act 1992 (c. 9), s. 4, Sch. 2 para. 20(a)(b) (in force 1.7.1992 by s. 7(2) of the amending Act); Finance (No. 2) Act 1992 (c. 48), ss. 35(2), 47, 48, 56, 77, Sch. 9 para. 20(1)(inserting ss. 143A and 143B), Sch. 17 paras. 3, 6(2)(5), 7, (the amendments coming into force 16.7.1992 except for the amendment by s. 56, Sch. 9 para. 20(1) which comes into force on 19.2.1993 by S.I. 1993/236, art. 2); and amendments (retrospective to 1.1.1992) by ss. 35(2), 47, 48 of the same 1992 Act, and amendments (27.7.1993 with effect as mentioned in ss. 84(3), 86(4), 88(4), 105(4) of the amending Act) by 1993 c. 34, ss. 84(3), 86(4), 88(4)(a)(b), 105(3)(4)