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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Value of asset attributable to trustee borrowing - detail

TCGA92/Sch4B/para12

Borrowed assets

If the trustees have borrowed the asset the whole value of the asset is attributable to trustee borrowing to the extent that the proceeds of that borrowing have not been applied for normal trust purposes.

Acquired assets

The value of an asset is attributable to trustee borrowing to the extent that the trustees have applied the proceeds of trustee borrowing in acquiring or enhancing the value of the asset. As with the application of the proceeds of borrowing for normal trust purposes, CG39160, there are provisions for dealing with replacement assets.

TCGA92/Sch4B/para12(4) applies the rules in TCGA92/S38 for the purposes of determining if the trustees’ expenditure is for the purposes of acquiring or enhancing the value of the asset. In the case of a section 104 holding of shares or securities a purchase of further shares or securities is treated as acquisition or enhancement expenditure.

Application of the proceeds of borrowing

The trustees are treated as applying the proceeds of borrowing on acquiring or enhancing the value of an asset if the expenditure is incurred when there is outstanding trustee borrowing. In other words this an arithmetic test and there is no attempt to trace how the acquisition of a particular asset has been financed.