No loss is taken to occur for the purposes of section 454 on a transfer of a deeply discounted security to a person connected with the transferor if conditions A and B and either condition C or conditions D and E are met.

Condition A is that the transferor acquired the security on its issue.

Condition B is that the amount paid by the transferor to acquire the security exceeded the market value of the security at the time of its issue.

Condition C is that at that time the transferor was connected with the issuer.

Condition D is that at that time the issuer was a close company.

Condition E is that at that time the transferor controlled that company with other persons to whom securities of the same kind were also issued.

Chapter 2 of Part 10 of CTA 2010 (meaning of “close company”) applies for the purposes of this section but with the omission of section 442(a) (exclusion of non-UK resident companies).

In this section “control” has the meaning given by F2sections 450 and 451 of CTA 2010.