What is value shifting under section 29 of the Taxation of Chargeable Gains Act 1992?

Value shifting occurs when value is moved between assets — such as shares or interests in land — without a formal disposal taking place. Section 29 deems a disposal to have occurred in defined circumstances, ensuring the transfer of value is subject to capital gains tax at market value under United Kingdom law.

How does section 29 affect controlling shareholders who shift value between shares?

If a controlling shareholder exercises control so that value passes out of their shares, or those of a connected person, into other shares or rights in the company, section 29 treats this as a disposal. Any capital loss on a subsequent sale of the diminished shares is not allowable to the extent it is attributable to the shifted value.

How does section 29 apply to sale and leaseback arrangements?

Where a property owner sells and becomes the lessee, and subsequent adjustments to the lease terms are overall favourable to the lessor, the lessee is treated as making a disposal of an interest in the property. This prevents further value being shifted to the former owner through lease variations without incurring capital gains tax.

What happens when rights or restrictions over an asset are extinguished under section 29?

When a person entitled to enforce a right or restriction over an asset voluntarily extinguishes or reduces it, wholly or in part, that person is treated as disposing of the right or restriction. This ensures the voluntary surrender of valuable rights is brought within the charge to capital gains tax at market value.

Taxation of Chargeable Gains Act 1992 section 29

General provisions

Section 29 deals with value shifting — situations where value is moved between assets (such as shares or interests in land) in ways that might otherwise escape capital gains tax because no formal disposal has taken place.

Where a person controlling a company uses that control to shift value out of their shares (or those of connected persons) into other shares or rights in the company, this is treated as a disposal of the shares from which value has passed.
Where the owner of land or other property sells it and becomes the lessee, and there is a subsequent adjustment of the lease terms that is overall favourable to the lessor, the lessee is treated as making a disposal of an interest in the property.
Where rights or restrictions over an asset are extinguished or reduced by the person entitled to enforce them, that person is treated as disposing of those rights or restrictions.
In all these deemed disposals, if the parties could have obtained consideration (or additional consideration) at arm's length, the transaction is treated as taking place at market value for capital gains tax purposes.

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