Income and Corporation Taxes Act 1988

770 Sales etc. at an undervalue or overvalue

(1) Subject to the provisions of this section and section 771, where any property is sold and—

(a) the buyer is a body of persons over whom the seller has control or the seller is a body of persons over whom the buyer has control or both the buyer and the seller are bodies of persons over whom the same person or persons has or have control; and

(b) the property is sold at a price (“the actual price”) which is either—

(i) less than the price which it might have been expected to fetch if the parties to the transaction had been independent persons dealing at arm’s length (“the arm’s length price”), or

(ii) greater than the arm’s length price,

then, in computing for tax purposes the income, profits or losses of the seller where the actual price was less than the arm’s length price, and of the buyer where the actual price was greater than the arm’s length price, the like consequences shall ensue as would have ensued if the property had been sold for the arm’s length price.

(2) Subsection (1) above shall not apply—

(a) in any case where—

(i) the actual price is less than the arm’s length price, and

(ii) the buyer is resident in the United Kingdom and is carrying on a trade there, and

(iii) the price of the property falls to be taken into account as a deduction in computing the profits or gains or losses of that trade for tax purposes; or

(b) in any case where—

(i) the actual price is greater than the arm’s length price, and

(ii) the seller is resident in the United Kingdom and is carrying on a trade there, and

(iii) the price of the property falls to be taken into account as a trading receipt in computing the profits or gains or losses of that trade for tax purposes; or

(c) in relation to any transaction in relation to which section 493(1) or (3) applies; or

(d) in relation to any other sale, unless the Board so direct.

(3) Where a direction is given under subsection (2)(d) above all such adjustments shall be made, whether by assessment, repayment of tax or otherwise, as are necessary to give effect to the direction.