© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Connection
Timing of connection​​
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- CGT connected party disposal: test at date of disposal/deemed date of disposal
"[23] Nonetheless, it appears to me, particularly in the light of the use of the verb in the present tense, "is", in section 18(1), that it is plain that the question of the connection must be considered at the time of disposal, which, as just mentioned, is dictated by section 28. The use of the present tense "acquires" in relation to the transaction, and the use of the present tense "is" in relation to the connection, in the very brief and clear section 18(1) really foreclose any argument that one can take different dates for the two things. The point is reinforced by the connection being with "the person making the disposal" which is also redolent of the present tense. Further, if one could take a different date for assessing the connection, how is one to choose a date? HMRC suggests that one should choose a date for the connection which best accords with the purpose of section 18. That would introduce subjectivity and unpredictability, not to mention a risk of circularity of reasoning, into a taxing statute, which seems to me to be thoroughly inappropriate." (Kellogg Brown& Root Holdings (UK) Ltd v. HMRC [2010] EWCA Civ 118)
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- All elements of test, including connection, may need to be satisfied at the same time
"[158] It is also worth pointing out that establishing a connection between SMCL and Mr Barnes at the date of the grant is not in fact sufficient for HMRC to succeed on this issue. Mr Barnes was not a development financier at that time and the land could only become exempt land (on the case advanced by HMRC) at a time when (a) Mr Barnes was a development financier, (b) SMCL was in occupation not substantially wholly for eligible purposes, and (c) Mr Barnes was (at that time) connected with SMCL. However, there was clearly no dispute that these three requirements were all satisfied together by some point in August 2014." (PGPG Limited v. HMRC [2017] UKFTT 782 (TC), Judge Falk)
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Future connection​​
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- Intention or expectation of state of affairs amounting in law to a connection may be relevant
"[140] ... The legislation is therefore capable of applying where it is intended or expected not only that a person who was already connected with an occupier (or intended occupier) at the date of grant would become a development financier, but also where the grantor intended or expected that a factual state of affairs would exist which would amount in law to a connection being created between the occupier and a person who is or later becomes a development financier. The exempt land test could then be satisfied provided that at the date of grant it was intended or expected that at some point before the end of the (expected) adjustment period a person would be in occupation and would at that time be connected with a development financier. Put another way, on the facts of this case the intention or expectation at the date of grant would need to be that the following state of affairs would exist at some point before the end of a 10 year period following the planned works: (a) Mr Barnes is a development financier, (b) Mr Barnes is connected with SMCL, and (c) SMCL is in occupation not substantially wholly for eligible purposes..." (PGPG Limited v. HMRC [2017] UKFTT 782 (TC), Judge Falk)
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