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HMRC internal manual

Capital Gains Manual

Hire purchase: multiple agreements: introduction

This guidance tells you about cases where, instead of what appears to be a series of separate transactions, you have, in fact, a single composite transaction. If you have a case of this type, then you may be faced with a large amount of documentation. Unfortunately there is no short-cut method of arriving at the correct analysis of the transaction. You, therefore, have to review ALL the documents.

People may engage in a sequence of transactions which are, in reality, stages in one composite transaction. These may appear, at first glance, to be several individual ones.

Composite sale, leaseback and repurchase agreements are one example, see CG12885+.

In this type of arrangement, you have to be able to link documents together to produce a composite transaction rather than a series of single separate transactions.

If you are dealing with a series of documents which may or may not form a single composite transaction then the general tests which enable you to link documents together are set out below. You should be aware that these are based on the rules of contract law NOT tax law.

In most of the cases involving a series of transactions which you will come across you will not need to consider using the tests. A hire purchase agreement, for example, may consist of a number of separate agreements, see CG12860.

Before you can link a series of transactions together, you have to show that at least one of the following tests is satisfied:

  • Do the documents refer to each other - if so you probably have a single composite transaction.
  • Were the documents signed on the same day or do they form a logical sequence - if so you probably have a single composite transaction.
  • If the documents are placed together do they read logically together - if so you probably have a single composite transaction.

If, on the other hand:

  • the documents stand alone or form no logical sequence - you probably have a series of separate transactions.