Commentary

C3.1810 CGT exempt assets—debts

Capital gains tax
Capital gains tax | Commentary

C3.1810 CGT exempt assets—debts

Capital gains tax | Commentary

CGT exempt assets

C3.1810 CGT exempt assets—debts

For corporation tax payers, the loan relationships regime for the taxation of corporate debt applies (see Division D1.7) and under this regime, all profits, gains and losses are dealt with on a revenue and not capital basis. Except in very limited circumstances, corporation tax payers will therefore be excluded from the capital gains tax regime in respect of debts. See Division D1.8 for the taxation of corporate foreign exchange and financial instruments.

Disposal of a debt

For individuals, and for companies in the limited circumstances where the loan relationship rules do not apply, no chargeable gain or allowable loss1 accrues to the original creditor or to his personal representative or legatee on a disposal of a debt2, or of an interest in a debt3. 'Legatee' includes any beneficiary or trustee under a will, a codicil, intestacy or receiving a donatio mortis causa4. This exemption does not, however, apply to:

  1.  

    •     a debt on a security or deemed security (see below), or

  2.  

    •     the gain accruing to a person on the disposal of a debt, or interest in a debt, owed by a bank which is not in sterling and which is represented by a sum standing to the credit of a person in an account in the bank, unless that person is an individual, trustee and personal representative5 (see C1.608)

Satisfaction of a debt

The satisfaction of any debt, except to the original creditor or his personal representative or legatee6, or in cases of

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