The receipt of compensation or insurance proceeds in respect of damage or injury to assets is a disposal to the extent that the receipt is a capital sum1. Where the asset continues in existence and is not disposed of by the owner, the receipt of compensation etc is a part disposal, and the allowable expenditure is apportioned accordingly2. For capital sums derived from assets generally, see C1.319. For part disposals see Division C2.4.
Example 1
TG owns a house which cost £80,000 in March 2013. In January 2023, the house was badly damaged by a falling tree and TG sued the neighbouring owner for damages. In July 2023, the action was settled and TG received £20,000. At that time, the value of the house was £140,000.
| | | £ |
| Disposal consideration | | | 20,000 |
| Deduct: Allowable expenditure— | | | |
| | | (10,000) |
| Chargeable gain | | | £10,000 |
| | | |
Because the time of disposal on receipt of a capital sum is the date of its receipt3,
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