Taxation of Chargeable Gains Act 1992, section 251

General provisions

Part VII Other property, businesses, investments etc.

(1)Where a person incurs a debt to another, whether in sterling or in some other currency, no chargeable gain shall accrue to that (that is the original) creditor or his personal representative or legatee on a disposal of the debt, except in the case of the debt on a security (as defined in section 132).

(2)Subject to the provisions of sections [F1849132, 135 and 136F1849] and subject to subsection (1) above, the satisfaction of a debt or part of it (including a debt on a security as defined in section 132) shall be treated as a disposal of the debt or of that part by the creditor made at the time when the debt or that part is satisfied.

(3)Where property is acquired by a creditor in satisfaction of his debt or part of it, then subject to the provisions of sections [F1850132, 135 and 136F1850] the property shall not be treated as disposed of by the debtor or acquired by the creditor for a consideration greater than its market value at the time of the creditor’s acquisition of it; but if under subsection (1) above (and in a case not falling within [F1851section 132, 135 or 136F1851] ) no chargeable gain is to accrue on a disposal of the debt by the creditor (that is the original creditor), and a chargeable gain accrues to him on a disposal by him of the property, the amount of the chargeable gain shall (where necessary) be reduced so as not to exceed the chargeable gain which would have accrued if he had acquired the property for a consideration equal to the amount of the debt or that part of it.

(4)A loss accruing on the disposal of a debt acquired by the person making the disposal from the original creditor or his personal representative or legatee at a time when the creditor or his personal representative or legatee is a person connected with the person making the disposal, and so acquired either directly or by one or more purchases through persons all of whom are connected with the person making the disposal, shall not be an allowable loss.

(5)[F1852 Where the trustees of a settlement are the original creditorF1852] , subsections (1) and (4) above shall apply as if for the references to the original creditor’s personal representative or legatee there were substituted references to any person becoming absolutely entitled, [F1853as against the trusteesF1853] , to the debt on its ceasing to be settled property, and to that person’s personal representative or legatee.

[F1854 (5A)References in this section to the disposal of a debt include the disposal of an interest in a debt (and, in the case of an interest in a debt, the reference in subsection (3) to the amount of the debt is to the amount of the person's interest in the debt).F1854]

[F1855 (6)For the purposes of this section a debenture issued by any company on or after 16th March 1993 shall be deemed to be a security (as defined in section 132) if—

(a)it is issued on a reorganisation (as defined in section 126(1)) or in pursuance of its allotment on any such reorganisation;

(b)it is issued in exchange for shares in or debentures of another company and in a case [F1856 to which section 135 applies and which is unaffected by section 137(1)F1856] ;

(c)it is issued under any such arrangements as are mentioned in subsection (1)(a) of section 136 and in a case unaffected by section 137 where section 136 requires shares or debentures in another company to be treated as exchanged for, or for anything that includes, that debenture; or

(d)it is issued in pursuance of rights attached to any debenture issued on or after 16th March 1993 and falling within paragraph (a), (b) or (c) above

[F1857 and any debenture which results from a conversion of securities within the meaning of section 132, or is issued in pursuance of rights attached to such a debenture, shall be deemed for the purposes of this section to be a security (as defined in that section).F1857,F1855]]

[F1858 (7)Where any instrument specified in subsection (8) below is not a security (as defined in section 132), that instrument shall be deemed to be such a security for the purposes of this section, other than the purposes of determining what is or is not an allowable loss in any case.

(8)The instruments mentioned in subsection (7) above are—

F1859 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)any instrument which F1860... is not a loan relationship of a company but which would be a [F1861 deeply discounted security for the purposes of Chapter 8 of Part 4 of ITTOIA 2005 if section 432(2) of that ActF1861] (excluded indexed securities) were omitted.F1858]

Definitions used in section 251 14

personal representatives

“personal representatives” has the same meaning as in the Corporation Tax Acts (see section 1119 of CTA 2010) ;

Defined in s.288(1) · see it in the full Act
securities

(6) In sub-paragraph (4)(d) “securities” has the same meaning as in section 132.

Defined in Sch.4B para.12(6) · see it in the full Act

(2) In sub-paragraph (1)(a) “securities” has the same meaning as in section 132.

Defined in Sch.4B para.7(2) · see it in the full Act
property

(6) Sub-paragraphs (4) and (5) above apply for the purposes of paragraph (b) of sub-paragraph (1) above as they apply for the purposes of paragraph (a), reading “income” for “property".

Defined in Sch.5 para.2(6) · see it in the full Act

(a) the reference to “assets” were a reference to “property”, and

Defined in Sch.4ZA para.22(2) · see it in the full Act
market value

(5AA) In this Act “market value” in relation to shares of a given class in an open-ended investment company the prices of which are published regularly by the authorised corporate director of that company (whether or not those shares are also quoted in The Stock Exchange Daily Official List) shall mean an amount equal to the price so published on the relevant date, or if no price was published on that date, on the latest date before that date.

Defined in s.272(5AA) · see it in the full Act

(5) In this Act “market value” in relation to any rights of unit holders in any unit trust scheme the buying and selling prices of which are published regularly by the managers of the scheme shall mean an amount equal to the buying price (that is the lower price) so published on the relevant date, or if none were published on that date, on the latest date before.

Defined in s.272(5) · see it in the full Act

(1) In this Act “market value” in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market.

Defined in s.272(1) · see it in the full Act

(4) In particular, for the purposes of paragraphs 5 and 7 of this Schedule “market value” has the meaning given by paragraph 92 of Schedule 2 to that Act (determination of market value); and Part 8 of this Act has effect subject to this paragraph.

Defined in Sch.7D para.1(4) · see it in the full Act
connected

(4) Section 1122 of CTA 2010 (meaning of “connected” persons) applies for the purposes of sub-paragraph (1A)(a).

Defined in Sch.7AC para.19(4) · see it in the full Act
allowable loss

“allowable loss” shall be construed in accordance with sections 8(2) , 16 , 16A , 261B, 261D and 263ZA ;

Defined in s.288(1) · see it in the full Act

(1) For the purposes of this Act, “allowable loss” does not include a loss accruing to a person if—

(a)it accrues to the person directly or indirectly in consequence of, or otherwise in connection with, any arrangements, and

(b)the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage.

Defined in s.16A(1) · see it in the full Act
trustee

(7A) In this section, sections 86A to 96 and Schedule 4C “trustee”, in relation to a settlement in relation to which there would be no trustees apart from this subsection, means any person in whom the settled property or its management is for the time being vested (and a person who is treated as a trustee of the settlement by virtue of this subsection shall be treated as a trustee of the settlement for the purposes of section 69).

Defined in s.97(7A) · see it in the full Act

(b) “trustee”, in relation to a settlement in relation to which there would be no trustees apart from this paragraph, means any person in whom the settled property or its management is for the time being vested.

Defined in s.286(3ZA) · see it in the full Act
settlement

(a) “settlement” has the same meaning as in section 620 of ITTOIA 2005, and

Defined in s.286(3ZA) · see it in the full Act

“settlement” has the meaning given by section 620 of ITTOIA 2005, and

Defined in s.97(7) · see it in the full Act
settled property

“settled property” and references (however expressed) to property comprised in a settlement shall be construed accordingly .

Defined in s.97(7) · see it in the full Act

In this Act, unless the context otherwise requires, “settled property” means any property held in trust other than property to which section 60 applies (and references, however expressed, to property comprised in a settlement are references to settled property) .

Defined in s.68 · see it in the full Act
company

“company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).

Defined in Sch.2 para.5(5) · see it in the full Act
shares

“shares” includes stock;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph, except in paragraphs (a) to (c) of sub-paragraph (6), “shares” includes an interest in shares.

Defined in Sch.7AC para.10(5) · see it in the full Act

(b) “shares” includes securities,

Defined in Sch.7 para.4(2) · see it in the full Act
the shares

(5) In sub-paragraphs (3) and (4) and in the following provisions of this Schedule references to “the shares” are to the shares referred to in sub-paragraph (1)(a).

Defined in Sch.7ZB para.1(5) · see it in the full Act

(a) references to “the shares” shall be construed in accordance with sub-paragraph (1) above, and

Defined in Sch.5B para.13(12) · see it in the full Act
arrangements

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

Defined in s.16A(2) · see it in the full Act
ITTOIA 2005

“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005 ;

Defined in s.288(1) · see it in the full Act

Cases considering section 251 4

DMWSHNZ Ltd v HM Revenue and Customs

[2015] EWCA Civ 1036 · 20 October 2015Interprets

Confirms that the debt-satisfaction provisions contain no deemed acquisition, a point central to the conclusion that repayment was not a disposal to the debtor. (see paras [53]-[57]) Applies the exception for a debt on a security, so a chargeable gain was not excluded on the disposal of the debt. (see paras [53]-[54]) Interprets satisfaction of a debt or part of it, including a debt on a security, as a disposal of the debt by the creditor when satisfied. The provision does not deem an acquisition, so repayment did not create a disposal to the debtor for section 171A. (see paras [13], [53]-[57])

The Commissioners for HMRC v Timothy Bunting

[2025] UKUT 96 (TCC) · 19 March 2025

Release and discharge of the loan in consideration for the shares was a satisfaction, and therefore a disposal, of that part of the debt for section 251(2). The negligible share value did not alter the result (see para [41]).

Timothy Bunting v The Commissioners for HMRC

[2026] EWCA Civ 1331 · 16 October 2026Interprets

Cited only. The market-value rule for property acquired in satisfaction of debt did not significantly assist the argument for trading-loan relief. Its suggested relationship with recovery under section 253(9) was discussed without deciding the competing clawback constructions (see paras [42]; [45]–[46]).

What each judgment says about section 251 is in the case-law panel in the full Act.

Amendments and notes

14 notes from legislation.gov.uk

Amendments

  1. F1849Words in s. 251(2) substituted (with effect in accordance with Sch. 9 paras. 7, 8 of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 5(12)(a)
  2. F1850Words in s. 251(3) substituted (with effect in accordance with Sch. 9 paras. 7, 8 of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 5(12)(b)(i)
  3. F1851Words in s. 251(3) substituted (with effect in accordance with Sch. 9 paras. 7, 8 of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 5(12)(b)(ii)
  4. F1852Words in s. 251(5) substituted (with effect in accordance with Sch. 12 para. 23(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 23(1)(a)
  5. F1853Words in s. 251(5) substituted (with effect in accordance with Sch. 12 para. 23(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 23(1)(b)
  6. F1854S. 251(5A) inserted (with effect in accordance with s. 34(6) of the amending Act) by Finance Act 2012 (c. 14), s. 35(3)
  7. F1855S. 251(6) inserted (27.7.1993 with effect as mentioned in s. 84(3)) by 1993 c. 34, s. 84(2)(3)
  8. F1856Words in s. 251(6)(b) substituted (with effect in accordance with Sch. 9 paras. 7, 8 of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 5(12)(c)
  9. F1857Words in s. 251(6) inserted (with effect in accordance with s. 88(6) of the amending Act) by Finance Act 1997 (c. 16), s. 88(5)
  10. F1858S. 251(7)(8) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 64 (with Sch. 15)
  11. F1859S. 251(8)(a) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 381(a), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)
  12. F1860Words in s. 251(8)(b) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 381(b), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)
  13. F1861Words in s. 251(8)(b) substituted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 442 (with Sch. 2)

Modifications

  1. C408S. 251(8) modified (27.7.1999) by Finance Act 1999 (c. 16), s. 65(11)