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HMRC internal manual

Capital Gains Manual

Debts: satisfied by acquisition of property: Section 251(3) adjustment

TCGA92/S251 (3)

In practice you make the adjustment required by TCGA92/S251 (3) as follows:

Step One

Compute the gain in the normal way treating the property as acquired at its market value at the date of the disposal of the debt. If this gives rise to a loss no further adjustment is required.

Step Two

If there is a gain you recompute the gain substituting the amount of the debt for the market value of the property. This is the gain you assess. In strictness the Act requires that you reduce the gain in Step One by the difference between the gain in Step One and Step Two.