Close connection

We are dealing with a buy-back of close company shares of a non-office holding minority shareholder upon which no dividends have been paid and for which no accounts can be obtained.

TCGA 1992 s 18 enables HMRC to substitute market value for capital gains tax disposals between connected parties.

However the capital gains tax pages on the tax return do not require such disclosure and the notes are silent. It presumably follows that a taxpayer completing a return without disclosure (of a connected party transaction) cannot be said to have completed the return incorrectly.

We have recommended use of the CG34 post-transaction clearance procedure to provide certainty and protection from penalties but the client is understandably reluctant to invite an enquiry (which is of course an inevitable consequence of utilising the...