Section 3A — Taxation of Chargeable Gains Act 1992: Gains connected to avoidance or foreign activities etc

Gains connected to avoidance or foreign activities etc 3A 1 A gain accruing to a company on the disposal of an asset is taken to be “connected to avoidance” unless it is shown that neither—

a the disposal of the asset by the company, nor b the acquisition or holding of the asset by the company, formed part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to capital gains tax or corporation tax.

2 A gain is “connected to a foreign trade” if it accrues on the disposal of an asset used only—

a for the purposes of a trade carried on by the company wholly outside the United Kingdom, or b for the purposes of the foreign part of a trade carried on by the company partly within, and partly outside, the United Kingdom, and the reference here to the foreign part of a trade is to the part of the trade carried on outside the United Kingdom. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 A gain accruing on the disposal of an asset is “connected to other economically significant foreign activities” if—

a the asset is used only for the purposes of activities carried on by the company wholly or mainly outside the United Kingdom, b the activities consist of the provision of goods or services on a commercial basis, and c the activities also satisfy the staff, premises and economic value test.

7 Activities satisfy the staff, premises and economic value test if they involve—

a the use of employees, agents or contractors of the company in numbers, and with competence and authority, commensurate with the size and nature of the activities, b the use of premises and equipment commensurate with the size and nature of the activities, and c the addition of economic value by the company to the persons to whom the goods or services are provided commensurate with the size and nature of the activities.

8 This section applies for the purposes of section 3(1)(b) and (c).