Definition. A person linked to another by family, trust, partnership or control, as defined in tax and company law. In the UK, see TCGA 1992 section 286 and Companies Act 2006 section 252; the US uses related persons in section 267.
How it works
When a director sells bitcoin to their own company, or a company sells bitcoin to its owner's other company, the two sides are not strangers. Tax and company law therefore define who counts as connected, and apply rules that stop the price or the loss being set to suit the people involved.
Section 286 of the Taxation of Chargeable Gains Act 1992 defines connected persons. HMRC's summary lists relatives, trustees, partners and companies; a company is connected with a person who controls it, alone or with persons connected with them. Relatives means siblings, ancestors and lineal descendants, with spouses and civil partners. Section 18 then treats a transaction between connected persons as not at arm's length, so market value is used, and a loss on a disposal to a connected person can be set only against gains on other disposals to that same person. Separately, Companies Act 2006 section 252 defines persons connected with a director for the rules on substantial property transactions.
Section 267(a)(1) of the Internal Revenue Code disallows a deduction for a loss on a sale or exchange between related persons listed in section 267(b). The list includes an individual and a corporation more than 50% in value of whose stock they own, directly or indirectly, and two corporations in the same controlled group.
Why it matters for a company
The price written on the paperwork may not be the price used for tax, and a loss may be restricted or lost. Shareholder approval may also be needed before the deal. Our judgement, not a rule: record the market value at the time from a stated source, and get the approvals before the bitcoin moves.
Common mistakes
- Using a friendly price rather than market value.
- Selling at a loss to a connected company and expecting to use the loss freely.
- Forgetting shareholder approval for a substantial non-cash asset.
Related
Sources
Primary sources only. Each link was checked on 9 November 2026. Rules change, so confirm the current version with your adviser.
- legislation.gov.ukTaxation of Chargeable Gains Act 1992, section 286: connected persons, including a company and the person who controls it
- HMRCCG14580: connected persons, relatives, trustees, partners and companies
- legislation.gov.ukTaxation of Chargeable Gains Act 1992, section 18: transactions between connected persons
- legislation.gov.ukCompanies Act 2006, section 252: persons connected with a director
- US Government Publishing Office (United States Code, 2024 edition)26 U.S.C. 267: losses, expenses and interest with respect to transactions between related taxpayers
This is general information and education only. It is not financial, investment, tax, accounting, legal or regulatory advice, and it is not a recommendation to buy, sell or hold bitcoin or any other asset. It does not take account of your circumstances or those of your company. You must obtain your own official professional advice to confirm this information is correct before acting on it.
Rules change. This information is correct to our understanding at the last-reviewed date, but it may be incomplete or out of date, and official sources take precedence. Bitcoin is volatile. A company that buys it could lose some or all of the money it puts in.
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