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HMRC internal manual

Capital Gains Manual

Debts: guarantees


A guarantor of a loan has no asset until they make a payment under the guarantee. At that time, they will take over part or all of the rights of the original creditor against the borrower. The payment under the guarantee is not, however, regarded as the cost of acquisition of those rights, so no relief would be available for amounts paid out under the guarantee, on normal capital gains principles. However, there are special rules deeming allowable losses to arise where loans to traders have become irrecoverable, and in consequence the guarantor has been called on to make a payment under the guarantee. Further advice is given at CG65990+.