Statement of Practice 8 (1979)
Published 18 June 1979
© Crown copyright 1979
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1. HM Revenue and Customs (HMRC) practice - announced in a statement on 13 December 1972 - has been that any element of compensation for temporary loss of profits, which is present in the compensation or price payable by an authority possessing compulsory powers for the acquisition of property used for the purposes of a trade or profession, is included as part of the consideration for the resulting disposal for the purposes of capital gains.
2. The Commissioners for HMRC have reconsidered this practice in the light of the decision of the Court of Appeal in the recent case of the City of Stoke on Trent v Wood Mitchell & Co Ltd ((1979) STC 197) (a Lands Tribunal case). In accordance with this decision any element of compensation received for temporary loss of profits in the circumstances described above falls to be included as a receipt taxable under Schedule D Case I or II. Compensation for losses on trading stock and to reimburse revenue expenditure, such as removal expenses and interest, will be treated in the same way for tax purposes.
3. The practice described in paragraph 2 will also apply in compensation cases where no interest is acquired (eg, compensation due to damage, injury or exploitation of land, or to the exercise of planning control).
4. The new practice will apply to all cases in which the liability had not been finally determined at the date of the Court of Appeal’s judgment (28 July 1978).