Taxes Consolidation Act 1997 section 537

Mortgages and charges not to be treated as disposals

Section 537 provides that mortgages and charges over assets are not treated as disposals for capital gains tax purposes, and sets out how dealings by creditors enforcing security are attributed to the debtor.

• The transfer of an asset as security (e.g. a mortgage) or its retransfer on redemption is not an acquisition or disposal for CGT purposes.
• Where a creditor enforces a security over an asset, the creditor is treated as acting as nominee for the debtor — any gain or loss is attributed to the debtor, not the creditor.
• Assets are treated as acquired and disposed of free of any security interest — underlying charges are disregarded in determining what has been disposed of.
• Where an asset is acquired subject to a charge, the full value of the charge is added to the consideration for the acquisition, so it forms part of the base cost for computing any future gain or loss.