Taxes Consolidation Act 1997 section 549

Transactions between connected persons

Section 549 provides measures to prevent avoidance of capital gains tax through arrangements between connected persons, including rules on market value substitution, loss restriction, and the treatment of rights or restrictions over assets.

• A disposal between connected persons is treated as not being at arm's length: market value is substituted for the actual consideration paid.
• A loss on a disposal to a connected person may only be offset against a gain on another disposal to the same connected person.
• Where a restrictive covenant is imposed on an asset transferred between connected persons, the asset's market value is reduced by the lesser of the restriction's market value and the increase in the asset's value if the restriction were extinguished.
• Certain rights or restrictions that would effectively destroy the asset's value without advantage to the disponer are ignored, but anti-avoidance rules prevent this treatment from being exploited to create artificial losses.