The treatment of insurance proceeds will depend on whether the insured item in the claim was a revenue asset eg the loss of stock for resale or whether it was a capital item eg the loss of plant and machinery including whether any part of the proceeds was made to make good a loss or expense deducted in the profits of the trade1.
Loss of a revenue item
It is well established that the whole of the money received under an insurance policy in respect of stock destroyed is a trade receipt. The amount is not limited to the amount shown as the value of the stock in the accounts of the business.
The leading case on this issue is Gliksten2. In that case a large quantity of the company's stock of timber was destroyed by fire, and the written-down value of the destroyed timber stood in the books at £160,824. The company received from the insurance company £477,838, representing the replacement value of the destroyed
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