Taxes Consolidation Act 1997 section 541

Debts

Section 541 sets out the capital gains tax treatment of disposals of debts, including debts denominated in foreign currency, and identifies circumstances in which debentures are treated as debts on a security.

• Where an original creditor disposes of a debt, no chargeable gain or allowable loss arises unless the debt is a "debt on a security" (broadly, a government or corporate bond); where a debt is transferred in a merger or division under the Companies Act 2014, the successor company is treated as the original creditor.
• If property is accepted in satisfaction of a debt, the creditor's acquisition cost is the market value of the property at the time; however, any gain on a subsequent disposal by the original creditor is capped at the gain that would arise if the property had been acquired for the face value of the debt.
• A loss on the disposal of a debt acquired from a connected person (directly or through a chain of connected persons) is not an allowable loss; gains on foreign currency bank balances are chargeable unless the currency was acquired for personal expenditure abroad, and transfers of foreign currency between accounts of the same person do not crystallise a gain or loss.
• Debentures issued in specified corporate transactions — such as share capital reorganisations, company amalgamations, and cross-border transfers under the EU Mergers Directive — are deemed to be debts on a security and their disposal is a chargeable event.