Taxation of Chargeable Gains Act 1992 section 251

General provisions

Section 251 sets out the capital gains tax treatment of debts, establishing that simple debts are generally not chargeable assets in the hands of the original creditor, and providing rules for when debts are satisfied or property is accepted in lieu of repayment.

• The original creditor (or their personal representative or legatee) does not face a chargeable gain on disposing of a simple debt — only debts that qualify as "securities" (such as loan stock or debentures) are subject to CGT in the creditor's hands
• When a debt is repaid or settled, this counts as a disposal for CGT purposes; if property is accepted instead of cash, the creditor's acquisition cost for that property is its market value, but any gain on a later sale is capped so it does not exceed the gain that would have arisen had the property been acquired for the amount of the debt
• A loss on disposal of a debt is not allowable if the person disposing of it acquired it (directly or through a chain of purchases) from the original creditor or their representative at a time when they were connected persons
• Certain debentures issued on or after 16 March 1993 in connection with company reorganisations or takeovers, and deeply discounted securities that are not company loan relationships, are treated as securities for the purposes of this section, bringing them within the charge to CGT