News – 06.11.24
Companies House reform: new transition plan published
Companies House reform: new transition plan published … Read more
Insight – 05.11.24
Are your Charity’s investment reviews robust enough?
Regular investment reviews are vital for charities to ensure alignment with objectives, manage risks, and comply with regulations. … Read more
Upcoming event – 07.11.24
VAT on private school fees webinar
Join us for an exclusive webinar on the new VAT policy for private schools. … Read more
Find us quickly
130 Wood Street, London, EC2V 6DL
enquiries@buzzacott.co.uk T +44 (0)20 7556 1200
You may be treated as making a disposal or part-disposal of that asset, for Capital Gains Tax (CGT) purposes, if you’ve received money under an insurance policy or as compensation when an asset is lost, damaged or destroyed. This treatment does not apply to assets that are exempt for CGT purposes (e.g. cars).
If an asset is damaged, but not completely destroyed, the general rule is that you’re treated as having partially disposed of the asset and a charge to CGT may arise when you receive compensation. There are some exceptions to this general rule, such as when you use all the money to repair the asset or where the money received is regarded as small.
If the asset is completely lost or destroyed, you’ll generally be liable to CGT on the difference between the money received and the acquisition cost of the asset, although other scenarios are possible.
If you receive no or less than full compensation, you may realise a capital loss, which is then available for offset against other capital gains.
If you buy an asset to replace the one that is lost or destroyed, you may be able to defer any CGT arising on the asset by treating the original asset as sold on a no gain/no loss basis.
There can be cases where there’s no underlying asset because the right to compensation is not connected with a claim for loss, damage or destruction, but for something non-proprietary, such as bad advice. Currently, the exempt amount of compensation is restricted to £500,000, although in some cases of goods or services supplied in the course of a trade, profession or vocation, HMRC may agree to lift the restriction. This is not always clear so it’s important for you to seek professional advice in such cases.
You may be treated as making a disposal or part-disposal of that asset, for Capital Gains Tax (CGT) purposes, if you’ve received money under an insurance policy or as compensation when an asset is lost, damaged or destroyed. This treatment does not apply to assets that are exempt for CGT purposes (e.g. cars).
If an asset is damaged, but not completely destroyed, the general rule is that you’re treated as having partially disposed of the asset and a charge to CGT may arise when you receive compensation. There are some exceptions to this general rule, such as when you use all the money to repair the asset or where the money received is regarded as small.
If the asset is completely lost or destroyed, you’ll generally be liable to CGT on the difference between the money received and the acquisition cost of the asset, although other scenarios are possible.
If you receive no or less than full compensation, you may realise a capital loss, which is then available for offset against other capital gains.
If you buy an asset to replace the one that is lost or destroyed, you may be able to defer any CGT arising on the asset by treating the original asset as sold on a no gain/no loss basis.
There can be cases where there’s no underlying asset because the right to compensation is not connected with a claim for loss, damage or destruction, but for something non-proprietary, such as bad advice. Currently, the exempt amount of compensation is restricted to £500,000, although in some cases of goods or services supplied in the course of a trade, profession or vocation, HMRC may agree to lift the restriction. This is not always clear so it’s important for you to seek professional advice in such cases.
For professional tax advice tailored to your unique circumstances, please fill out the form below and one of our personal tax experts will be in touch to discuss your requirements and how we can help.
We use necessary cookies to make our site work. We’d also like to set optional analytics and marketing cookies. We won't set these cookies unless you choose to turn these cookies on. Using this tool will also set a cookie on your device to remember your preferences.
For more information about the cookies we use, see our Cookies page.
Please be aware:
— If you delete all your cookies you will have to update your preferences with us again.
— If you use a different device or browser you will have to tell us your preferences again.
Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.
Analytics cookies help us to understand how visitors interact with our website by collecting and reporting information anonymously.
Marketing cookies are used to track visitors across websites. The intention is to display ads that are relevant and engaging for the individual user and thereby more valuable for publishers and third party advertisers.