537 Mortgages and charges not to be treated as disposals

Summary

The transfer of an asset as security, including a retransfer on redemption of the security, is not a disposal of the asset for capital gains tax purposes. Where a creditor who holds an asset as security enforces the security, the creditor is treated as nominee of the debtor. Acquisitions and disposals are treated as free of any interest by way of security.

Details

(1) The transfer of an asset as security (for example, a mortgage of property) or a retransfer on redemption of the security is not treated as a disposal for capital gains tax purposes.

(2) Where a creditor who holds an asset as security enforces the security, the creditor is treated for the purposes of capital gains tax as the nominee of the debtor. (The position of nominees is dealt with in section 567(2).) Anything done by a receiver, manager or factor appointed to enforce the security is treated as done by the creditor and thus as nominee of the debtor.

(3) Acquisitions and disposals are treated as being free of any interest by way of security. Where an asset is disposed of subject to a charge, the whole asset is treated as having been disposed of, that is, the underlying charge is disregarded. Where an asset is acquired subject to a charge, the value of the charge is added to the consideration for the acquisition so that the cost of the charge will be taken into account in computing any gain or loss on a subsequent disposal of the asset.

Relevant Date: Finance Act 2019