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HMRC internal manual

Capital Gains Manual

Value shifting: TCGA92 S29: scope

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

CG13230 listed three situations where TCGA92/S29 may apply. The first of these 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 in CG13230 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+.