C2.116 Value of asset reduced before disposal
Special provisions apply where, as a result of a scheme or arrangements, the value of an asset disposed of has been materially reduced and any person has received a tax-free benefit; the scheme or arrangements may be made before or after the disposal1.
A benefit is conferred on a person if he becomes entitled to any money, money's worth, increase in the value of an asset or release from any liability and is tax-free unless he is required to take it into account in computing his liability to income tax, corporation tax or capital gains tax2.
The provisions do not apply:
• where the reduction in value occurred before 29 March 19773
• where the disposal takes place between4:
– spouses or civil partners living together
– personal representatives and legatees, or
– companies in a group
• if the tax-free benefit is obtained by a person other than the person making the disposal and the avoidance of tax is not the main purpose or one of the main purposes of the transaction5
Where the provisions apply, in computing the gain or loss on the disposal of an asset (the first asset) the consideration for the disposal is to be increased by a just and reasonable amount, having regard to the scheme and the benefit obtained6. Where such an increase has been made and the benefit