In Capital Gains, a connected person is:
- your husband or wife or civil partner (but see the notes on page CGN 2 of HMRC's Capital Gains Summary Notes on transfers of assets between husbands and wives and civil partners)
- your brothers and sisters, and your spouse’s or civil partner’s brothers and sisters
- your, and your spouse’s or civil partner’s parents, grandparents and other ancestors
- your, and your spouse’s or civil partner’s children and other direct descendants
- the spouses or civil partners of any of the relatives mentioned above
- your business partners and their spouses or civil partners and relatives (except for genuine commercial acquisitions or disposals of partnership assets)
- any company you control, on your own or with any of the other people mentioned above
- the trustees of any settlement where you are, or any person connected with you is, a settlor.
If you dispose of an asset to or acquire an asset from a connected person, you need to replace the price paid with the market value of the asset when you work out your gain or loss.
If you make a loss you can only set that loss against gains made on other disposals to the same connected person. These are known as clogged losses. Although they will be included in your total loss figure, you'll need to keep a separate record of each clogged loss carried forward to later years to make sure you deduct it correctly from future gains.