B2.204 Lump sums treated as capital or revenue receiptsThe fact that a receipt is in a lump sum does not necessarily mean that the item is a capital one. A lump sum has to be treated for its capital or revenue character in the same way as a series of sums. However, the fact that it is a lump sum, with little or no possibility of its recurrence, points to the receipt being a capital item, though this test is not of itself conclusive. On the payments side it is an important consideration whether the payment of the lump sum extinguished a liability of the payer to make a series of revenue payments in the future; see the Anglo-Persian Oil Co1 case. On the receipts side a cogent test is whether the lump sum was received in consideration of the recipient's surrendering an asset which was wholly or mainly the foundation of his source of income; see Barr, Crombie & Co2.The summary below distinguishes between capital receipts and revenue receipts which were the subject of various cases.Capital receiptsThe following have been held to be capital receipts: • compensation received by a fireclay company from a railway company for leaving part of the fireclay unworked3 • sum received on cancellation of the company's future rights under comprehensive agreements for sharing profits4 (see B2.203) • sums received from traders for the installation of plant for carrying out the company's patented process for renovating motor tyres, the company agreeing not to
The fact that a receipt is in a lump sum does not necessarily mean that the item is a capital one. A lump sum has to be treated for its capital or revenue character in the same way as a series of sums. However, the fact that it is a lump sum, with little or no possibility of its recurrence, points to the receipt being a capital item, though this test is not of itself conclusive. On the payments side it is an important consideration whether the payment of the lump sum extinguished a liability of the payer to make a series of revenue payments in the future; see the Anglo-Persian Oil Co1 case. On the receipts side a cogent test is whether the lump sum was received in consideration of the recipient's surrendering an asset which was wholly or mainly the foundation of his source of income; see Barr, Crombie & Co2.
The summary below distinguishes between capital receipts and revenue receipts which were the subject of various cases.
The following have been held to be capital receipts:
• compensation received by a fireclay company from a railway company for leaving part of the fireclay unworked3
• sum received on cancellation of the company's future rights under comprehensive agreements for sharing profits4 (see B2.203)
• sums received from traders for the installation of plant for carrying out the company's patented process for renovating motor tyres, the company agreeing not to
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.