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As set out in C2.109, where a person disposes of an asset to a connected person, the transaction is otherwise than by way of a bargain at arm's length and therefore the consideration for the disposal is deemed to be the open market value of the asset at the date of the disposal¹. This is so regardless of the actual consideration, if any, or whether the transaction is actually on arm's length terms. This rule is to prevent taxpayers from avoiding tax on capital gains by, for instance, transferring an asset with a large potential gain to a connected person who is outside the UK tax net.

For more details on how market value is calculated see C2.120. The market value rule will apply if the parties are connected at the time of the disposal. If the disposal takes place under a contract the time of the disposal must be determined using the rules in TCGA 1992, s 28, see C1.322.

A way round these rules could be for the value of the asset