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Connected persons for tax purposes

20 June 2024

The definition of a connected person for tax purposes varies. A statutory definition of “connected persons” for Capital Gains Tax purposes is set out in Section 286 of the Taxation of Chargeable Gains Act (TCGA) 1992.

The term “connected person” varies in its definition for tax purposes. Section 286 of the Taxation of Chargeable Gains Act (TCGA) 1992 provides a statutory definition. It applies specifically for Capital Gains Tax purposes.

The legislation defines a connected person as follows. An individual is connected with another person if that person is the individual’s spouse or civil partner. It also applies if the person is a relative, or the spouse or civil partner of a relative, of the individual or of the individual’s spouse or civil partner.

In this context, a ‘relative’ refers to a brother, sister, ancestor or lineal descendant. It also includes spouses or civil partners of relatives. However, the term ‘relative’ does not encompass all family relationships. Notably, it excludes nephews, nieces, uncles and aunts.

HMRC’s internal guidance further clarifies this definition. It states that certain persons are excluded. These include the widows or widowers, or surviving civil partners, of deceased persons. It also excludes relatives of a deceased spouse or of a deceased civil partner. However, this exclusion applies unless a connection can be established by a route not involving the deceased. A dissolution of a civil partnership or a divorce can also result in additional persons ceasing to be connected with the individual.

Source: HM Revenue & Customs Tue, 18 Jun 2024 00:00:00 +0100

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