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