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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific receipts: insurance recoveries: capital recoveries

S106 Income Tax (Trading and Other Income) Act 2005, S103 Corporation Tax Act 2009

A sum received under a policy insuring a fixed asset against damage or loss is a capital receipt. However, any expenditure incurred in making good the damage or loss by repair, renewal or by replacement may be an allowable deduction.

Where a deduction has been made and the trader recovers a capital sum under an insurance policy or indemnity contract in respect of the loss or expense for which the deduction had been made, the capital sum must be included as a receipt in calculating the taxable profits of the trade (but only up to the amount of the deduction).