Disposals to Connected Parties

Disposals made to a connected party (other than a spouse/civil partner) are deemed to be made at market value at the date of disposal. Any actual consideration given by the connected party for a cryptoasset is ignored.

If there is a gain, it is simply aggregated with the other gains in the year.

If it is a loss, then it cannot be set against other gains in the year. This is called a ‘clogged loss’.

It can only be set against gains to the same connected person at a time when they remain connected:

• in the same tax year; or

• carried forward to offset against future gains made on disposals to the same person.

These can be gains of any type, such as shares or property; not just cryptoassets.

Who is connected?

For the purposes of capital gains tax, an individual is connected with all of the following:

• his spouse or civil partner

• his ‘relatives’ (defined as ancestors such as one’s parents or grandparents, lineal descendants such as children or grandchildren, and brothers or sisters)

• the spouses or civil partners of his ‘relatives’

• the ‘relatives’ of his spouse or civil partners and the spouses or civil partners of these relatives

• his business partners, their spouses / civil partners and their ‘relatives’

• trustee of settlement in which he or a connected person are settlor

• a company which he controls (with or without connected persons). This control can be via giving another person directions.

A taxpayer is not connected with his uncles, cousins, nieces or nephews, as they are not ‘relatives’.