Taxation of Chargeable Gains Act 1992 section 3A

Gains connected to avoidance or foreign activities etc.

Section 3A defines when a gain made by a non-UK resident close company is "connected to avoidance", "connected to a foreign trade", or "connected to other economically significant foreign activities", for the purposes of determining whether the gain may be attributed to UK resident participators under section 3.

• A gain is presumed to be "connected to avoidance" unless it can be shown that neither the disposal, acquisition, nor holding of the asset formed part of a scheme whose main purpose was avoiding capital gains tax or corporation tax.
• A gain is "connected to a foreign trade" if the asset was used solely for a trade carried on entirely outside the UK, or solely for the foreign part of a trade carried on partly inside and partly outside the UK.
• A gain is "connected to other economically significant foreign activities" if the asset was used solely for commercial activities carried on wholly or mainly outside the UK that also satisfy the staff, premises and economic value test.
• The staff, premises and economic value test requires that the foreign activities involve appropriate numbers of staff with suitable competence, adequate premises and equipment, and the addition of genuine economic value — all commensurate with the size and nature of the activities.