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HMRC internal manual

Capital Gains Manual

Alternative test for TCGA92/Sch4B/para6(2)(b) to apply


To satisfy the test that the proceeds of borrowing are spent on ordinary trust assets the asset must be settled property immediately after the material time. In other words it must be trust property after the transfer of value. TCGA92/Sch4B/para8 provides an alternative test if the acquired asset is no longer settled property.

If the original asset has been sold and the proceeds used to acquire another asset or assets the test is satisfied if:

  • the new asset or assets are ordinary trust assets
  • those assets are themselves settled property immediately after the material time.

The test in TCGA92/Sch4B/para8(1)(b) is that the new assets directly or indirectly represent the original assets. It will also apply to shares issued on a company reconstruction.

Original asset lost or destroyed

The original asset may have been lost or destroyed such that TCGA92/S24(1) applies to treat the asset as disposed of. Here there is no requirement that anything has replaced the lost asset. This also applies if the replacement assets mentioned in paragraph 8(1)(b) have themselves been lost or destroyed.