CG13220 - Introduction and computation: occasions of charge: value shifting and depreciatory transactions: section 29 TCGA 1992
Without special rules, it would be possible to manipulate assets such as shares, or interests in land, so that value passes from one holding or interest into another without there being any disposal for capital gains purposes. The value shifting provisions in TCGA92/S29 were introduced to counter such avoidance.
You are most likely to see cases where these rules apply in transactions between connected persons, for example transfers of value from parents to children, or between associated companies.
TCGA92/S29 (2), TCGA92/S29 (4) & TCGA92/S29 (5)
TCGA92/S29 can operate in three situations:
- Where a person, or persons, who control a company use that control (see CG14620) so that value or valuable rights pass out of shares which they own (or are owned by persons connected with them) into other shares in, or rights over, the company.
- Where the owner of land (or any other property) sells it and becomes lessee, and there are subsequently arrangements generally favourable to the lessor.
- Where rights or restrictions over any asset are reduced or removed by the person entitled to enforce them.
In the situations outlined above, the value shifting rules deem a disposal (or part-disposal) by the person transferring value. There is a corresponding acquisition by the person or persons who receive the value.
The market value rule, TCGA92/S17 then operates, so that the person transferring the value is liable to Capital Gains Tax based on the amount which he or she could have obtained for the transfer, if the parties had been at arm's length.
If anything is received for the transfer of value, the rules add to this amount any additional amount which could have been obtained. So, again, liability arises on the full amount of the value transferred.
Interaction with other provisions
The normal capital gains rules apply to the deemed disposal under TCGA92/S29. So, for example, where the relevant conditions are satisfied or relief under the gift of business assets provisions (TCGA92/S165, see CG66450+) may be given against any gains.
Transfer of value between spouses or between civil partners of each other will not give rise to any gain (TCGA92/S58, see CG22200+).
Further advice
The first of the above situations listed relates to shares in, or other rights over, a company. More detailed guidance and examples can be found in CG58850+
Although the second and third situations noted above can relate to any asset, you are most likely to come across them in the context of transactions involving land. Further advice on these is given at CG72000+.