A ‘value-shifting arrangement’ is defined as an arrangement by which:
- One person (Mr. X) retains an interest in a company; but
- the market value of Mr. X’s interest decreases following a change in the rights or entitlements of the interests in the company (other than as a result of a disposal at market value);
- while the value of Mr. X’s connected person’s (for example Mr. X’s son) direct or indirect interest in it increases; or
- Mr. X’s son acquires a direct or indirect interest in the company.
An example of a value-shifting arrangement may be where a parent (i.e. Mr. X) who owns all the shares in a company issues additional shares to his son at a discount, thereby reducing the value of his own shares. Mr. X effectively shifted value from himself to his son.
The decrease in value of Mr. X’s interest is regarded as a deemed disposal. The proceeds are deemed to be the amount by which the market value of Mr. X’s interest has decreased as a result of the arrangement.
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