Commentary

C1.319 Capital sums derived from assets

Capital gains tax
Capital gains tax | Commentary

C1.319 Capital sums derived from assets

Capital gains tax | Commentary

C1.319 Capital sums derived from assets

Where a capital sum is derived from an asset, notwithstanding that no asset is acquired by the person paying the capital sum, there is deemed to be a disposal of an asset1.

This provision applies in particular to2:

  1.  

    (a)     capital sums received by way of compensation for any kind of damage or injury to assets or for the loss, destruction or dissipation of assets or for any depreciation or risk of depreciation of an asset

  2.  

    (b)     capital sums received under a policy of insurance of the risk of any kind of damage or injury to assets, or for loss or depreciation of, assets

  3.  

    (c)     capital sums received in return for forfeiture or surrender of rights, or for refraining from exercising rights, and

  4.  

    (d)     capital sums received as consideration for use or exploitation of assets

An example of (d) above would be where a capital sum is paid to a landowner or farmer for the granting of easements or wayleaves for a term of years or perpetuity3. An easement gives one landowner a particular right over the land of another4.

As to compensation applied in replacing or reinstating lost or damaged assets, see C1.325, C2.502 and C2.504.

Is the capital sum derived from the asset?

The capital sum must be derived from the asset and if it can be attached to another source there would be no liability under TCGA 1992, s 22.

This was demonstrated in Powell5, where the taxpayer, a tenant farmer, surrendered land to his landlord and

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