Finance Act 1951

37 Sales, etc. between associated persons

(1) Subject to the provisions of this section, where, on or after the tenth day of April, nineteen hundred and fifty-one, 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 seller and the buyer are bodies of persons and some other person has control over both of them; and

(b) the property is sold at a price 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,

then, in computing the income, profits or losses of the seller for income tax and profits tax purposes, the like consequences shall ensue as would have ensued if the property had been sold for the price which it would have fetched if the transaction had been a transaction between independent persons dealing as aforesaid :

Provided that this subsection shall not apply where the buyer is resident in the United Kingdom and is carrying on a trade therein, and 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 income tax purposes.

(2) Subject to the provisions of this section, where, on or after the tenth day of April, nineteen hundred and fifty-one, 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 seller and the buyer are bodies of persons and some other person has control over both of them; and

(b) the property is sold at a price greater 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,

then, in computing the income, profits or losses of the buyer for income tax and profits tax purposes, the like consequences shall ensue as would have ensued if the property had been sold for the price which it would have fetched if the transaction had been a transaction between independent persons dealing as aforesaid:

Provided that this subsection shall not apply where the seller is resident in the United Kingdom and is carrying on a trade therein, and 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 income tax purposes.

(3) The preceding provisions of this section shall not apply in relation to any sale unless the Commissioners of Inland Revenue so direct, and where such a direction is given all such adjustments shall be made, whether by additional assessment, repayment of tax or otherwise, as are necessary to give effect to the direction.

(4) Nothing in this section shall be construed as affecting the operation of Rule 6 or Rule 7 of the Rules applicable to Cases I and II of Schedule D, or of any of the provisions of the Income Tax Act, 1945, or of Part IV of the Finance Act, 1944.

(5) In this section, "body of persons" includes a partnership and " control" has the meaning ascribed to it by subsection (1) of section sixty-eight of the Income Tax Act, 1945, and, for the purposes of this section, a sale shall be deemed to take place at the time of completion or at the time when possession is given, whichever is the earlier.

(6) The preceding provisions of this section shall, with the necessary adaptations, have effect in relation to lettings and hirings of property, grants and transfers of rights, interests or licences and the giving of business facilities of whatever kind as they have effect in relation to sales, and the references in the said preceding provisions to sales, sellers, buyers and prices shall be deemed to be extended accordingly:

Provided that nothing in this subsection shall apply to any letting of any lands, tenements, hereditaments or heritages charged to income tax under No. I of Schedule A.

(7) Rule 7 of the General Rules shall cease to have effect, except as respects transactions taking place before the tenth day of April, nineteen hundred and fifty-one.