Taxation of Chargeable Gains Act 1992 section 26

Mortgages and charges not to be treated as disposals

Section 26 establishes that mortgages, charges and other security arrangements over assets do not give rise to capital gains tax disposals, and sets out how enforcement of such security is treated for tax purposes.

• Transferring an asset as security (such as granting a mortgage) or redeeming that security is not treated as an acquisition or disposal for capital gains tax purposes.
• Where a creditor enforces the security over an asset, the creditor is treated as acting as nominee of the debtor — and the same applies to any receiver, manager or judicial factor appointed to enforce the security.
• Assets are treated as acquired and disposed of free from any security interest, meaning the underlying charge is disregarded when determining what has been disposed of.
• Where an asset is acquired subject to a charge, the full amount of the liability assumed is added to the acquisition consideration, ensuring the cost of the charge is reflected in any future gain or loss calculation.