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The courts are reluctant to interfere with a commercial bargain even where the parties are connected in some way. There are three situations where market value may be substituted:

• in the case of an 'illusory or colourable or fraudulent transactions', see comments in Craddock v Zevo Finance Co Ltd [1946] 27 TC at page 290. 'Colourable' is explained as 'a fancy price having no relationship to the real value', page 292,
• where the transaction is not entered into as a commercial transaction, see BIM33600 onwards,
• where the stock is acquired from a discontinuing business, see BIM33450 onwards.

Purchase at undervalue - Jacgilden (Weston Hall) Ltd v Castle [1969] 45 TC 685

The property investment company acquired a property for 拢72,000 in a transaction arranged by its managing shareholder. Shortly afterwards the company sold the cleared site for 拢155,000. The company claimed to bring in the market value of 拢150,000 as the cost of the property, rather than the 拢72,000 it paid. It was arguing that it acquired the property partly as a gift from the managing shareholder. Plowman J considered the decided cases where a stock disposal was otherwise than by way of trade, but distinguished them on the basis that the transaction in Jacgilden was a commercial trading transaction. That being so he upheld the decision of the Special Commissioners that the acquisition was a commercial acquisition and the proper amount to be debited in respect of the property was its cost, 拢72,000.

So where stock is purchased at below market value in a commercial transaction then the acquisition value is the amount paid, unless Pt 3 Ch 11 Corporation Tax Act 2009 applies, see BIM33560.