Income and Corporation Taxes Act 1970

Gifts, settled property and bargains not at arm's length

3(1)Where a person resident and ordinarily resident in the United Kingdom either—

(a)disposes by way of gift of an asset previously acquired by him, but does so without there being, within the meaning of Case VII, an acquisition and disposal by him, or

(b)disposes by way of gift of an asset acquired by him only as legatee,

then, so far as relates to the interest taken by the donee, the donee shall be treated as if the donor's acquisition of the asset had been his acquisition of it.

(2)Where, in a case not falling within sub-paragraph (1)(a) or (1)(b) above, a person resident and ordinarily resident in the United Kingdom disposes by way of gift of an asset acquired or to be acquired by him, and the donee is also resident and ordinarily resident in the United Kingdom, then, on an election being made in that behalf—

(a)the donor shall not be chargeable under Case VII in respect of any acquisition and disposal by reference to that disposal, and

(b)the donee shall be treated as if the donor's acquisition of the asset had been his acquisition of it, but so that the amount of the consideration for which he is treated as acquiring the asset shall not by virtue of this sub-paragraph be increased.

(3)An election under sub-paragraph (2) above shall be made by the donor and donee jointly, except that it may be made by the donee alone if the donor would not, apart from that sub-paragraph, be chargeable to tax under Case VII in respect of the gain (if any) treated as accruing to him from his acquisition and disposal of the asset.

(4)A person shall not be chargeable under Case VII in respect of any acquisition and disposal by reference to a disposal made to any charity if the disposal is by way of gift for the purposes of the charity.

In this sub-paragraph "charity" means any body of persons or trust established for charitable purposes only.

4(1)Section 162(4) of this Act and paragraph 3 above shall apply in relation to a gift in settlement as a gift to the trustees of the settlement, and shall so apply notwithstanding that the settlor is one of the trustees, or the sole trustee, of the settlement; but if the settlor or the settlor's wife or husband has, or can by any means (whether or not requiring any consent or concurrence) obtain for the settlor or for the settlor's wife or husband any beneficial interest in the settled property or the income from it, no loss treated as accruing to the settlor by reason of the gift in settlement shall be allowable under Case VII.

(2)Subject to sub-paragraph (3) below, where under a settlement a person becomes absolutely entitled as against the trustee to settled property (whether alone or jointly with another), he shall be chargeable by reference to any subsequent disposal of the property by him as if its acquisition by the trustees had been his acquisition of it.

(3)Where for a consideration in money or money's worth a person becomes absolutely entitled as against the trustee to settled property, or two or more persons jointly become so entitled, either by the exercise of a power of appointment under the settlement or by acquiring the interests of persons who were together so entitled and acted in concert in disposing of their interests to him or them, then, notwithstanding anything in section 163(4) of this Act—

(a)the person or persons becoming so entitled shall, on disposing of the property, be chargeable under Case VII by reference to that acquisition of it, if there is an acquisition and disposal by him or them, and

(b)the person exercising the power, or persons disposing of their interests under the settlement, shall be chargeable under that Case by reference to that disposal of the property, as if its acquisition by the trustees had been his or their acquisition of it.

5(1)Subject to sub-paragraph (4) below, where a person resident and ordinarily resident in the United Kingdom disposes otherwise than by way of bargain at arm's length (but not by way of gift) of an asset acquired or to be acquired by him so that there is an acquisition and disposal of the asset by him, and the person acquiring the asset on that disposal is also resident and ordinarily resident in the United Kingdom, then, on an election being made in that behalf, the person disposing of the asset and the person acquiring it on that disposal shall be treated as doing so for a consideration equal to whichever is the higher of—

(a)the actual consideration, and

(b)such amount as will secure that neither a gain nor a loss accrues to the person disposing of the asset from his acquisition and disposal of it:

Provided that this sub-paragraph shall not apply so as to increase the amount of the consideration for which those persons are respectively treated as disposing of and acquiring the asset.

(2)An election under this paragraph shall be made jointly by the person disposing of the asset and the person acquiring it, except that an election may be made by the person disposing of the asset alone if the person acquiring it would not, on disposing of it, be chargeable to tax under Case VII in respect of the gain (if any) accruing to him from his acquisition and disposal of it.

(3)In a case falling within section 162(4)(b) of this Act, the amount referred to in paragraph (b) of sub-paragraph (1) above shall be taken to be higher than the actual consideration referred to in paragraph (a) of that sub-paragraph.

(4)This paragraph shall not apply to a disposal of assets by a company by way of distribution in respect of shares in the company.

6(1)Where, in the case of a man and his wife living with him, the man disposes of an asset acquired or to be acquired by him to the wife, or the wife disposes of an asset acquired or to be acquired by her to the man, then—

(a)the one making the disposal shall not be chargeable under Case VII in respect of an acquisition and disposal by reference to that disposal, and

(b)the one to whom the disposal is made shall be treated as if the other's acquisition of the asset had been his or her acquisition of it:

Provided that this sub-paragraph shall not apply in relation to a disposal of an asset if, until the disposal, the asset formed part of the trading stock of a trade carried on by the one making the disposal, or if the asset is acquired as trading stock for the purposes of a trade carried on by the one acquiring it.

(2)Where a person disposes of an asset to a company of which he has control, no loss accruing to him from the acquisition and disposal of the asset shall be allowable under Case VII otherwise than by deduction from any gain accruing on the disposal of assets to the company while he has control of it; and, for the purposes of this sub-paragraph, an individual shall be treated as having control of a company if the individual's wife or husband has control of it, or if they together have control of it.