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HMRC internal manual

Capital Gains Manual

Securities: debts: general points: payments under guarantee

The right to the debt is an asset within TCGA92/S21 (1), but on normal capital gains principles no allowable loss will accrue to the guarantor, C Ltd, on a subsequent disposal of the debt. This follows from the case of Cleveleys Investment Trust Co v CIR (No.2), 51TC26, where it was held that in these circumstances the main object of the payment by the guarantor was to meet its obligation under the terms of the guarantee it had given. The acquisition from the bank of the right over the debt was merely incidental. Thus, the payment to the bank was not money given `wholly and exclusively’ for the acquisition of the debt. It cannot, therefore, be deducted in computing any gain on any subsequent disposal, see CG15150+.