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HMRC internal manual

Capital Gains Manual

Connected persons: trustees: pension funds

Pension funds may give rise to particular difficulties. It is considered that for the purposes of Income Tax a pension fund, certainly an approved one, is not a settlement, because of the absence of ‘bounty’; (see Berry v Warnett, 55TC92 for a discussion of the bounty test). Accordingly transfers of assets to Pension Funds are not connected persons transactions and there is no restriction of availability of losses under Section 18(3). Examples of transactions are where a person transfers an asset to a pension fund, even though he or she may be the main or only employee concerned, or a gratuitous transfer by the company which is the employer. However it will often be the case that this is not a ‘bargain at arm’s length’, see CG14540+, and therefore the disposal will be regarded as having taken place at market value. Any case where it is suspected that an excessive price has been paid for an asset by an approved pension fund, or an asset has been sold by such a fund at below market value, should be reported to the Pension Schemes Office.

Cases where you wish to connect a trustee with a body corporate using the provisions of TCGA92/S286 (3) (A), which is identically worded to ICTA88/S839 (3) (A), see CG14590, should be reported to HMRC Trusts - Bootle with the trust folder.