CG45330 - Group asset transfers: no gain/loss disposals: exceptions: debts

TCGA92/S171 (2) (a)

The no gain/no loss rule does not apply to a disposal of a debt due from a member of a group of companies where the disposal is effected by satisfying the debt or part of it. This specific exception, in TCGA92/S171 (2)(a), is arguably redundant on the basis that for such a disposal there is no corresponding acquisition, so the general rule in Section 171(1) would not in any event apply.

The exclusion of debts from the no gain/no loss rule only applies to the disposal of the debt itself at the time it is wholly or partly repaid. If one group company transfers an asset to another in satisfaction of a debt, the no gain/no loss rule may apply separately to the asset transferred.

EXAMPLE

Company A lends money to company B in the same group. In satisfaction of the debt company B transfers an asset (land) to company A. If none of the specific exclusions from Section 171(1) applies, B disposes of the land to A at no gain/no loss, so that A effectively takes over the capital gains cost of the land to B. The no gain/no loss rule does no apply to A's disposal of the debt.