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HMRC internal manual

Business Income Manual

Farming: compensation for land etc acquired by public bodies

S25, S33 Income Tax (Trading and Other Income) Act 2005, S46, S53 Corporation Tax Act 2009

Compensation payable to a farmer for the compulsory acquisition of land which he owns or for rights over such land should be dealt with in accordance with the instructions at BIM40115. Thus, any element of compensation received by a farmer for temporary loss of profits or for losses on trading stock or to reimburse revenue expenses falls to be included as a receipt taxable as trading income.

Compensation paid under S20 Compulsory Purchase Act 1965, to a farmer who has no greater interest in the land than as a tenant for a year, or from year to year, is computed separately for the value of the interest yet to run and the various other heads under which he or she has suffered damage. The amount of compensation relating to each head should be considered separately on its merits in accordance with the principles in BIM40100 onwards. Any case of difficulty should be submitted to Business Profits with a note of the enactment under which the compensation is payable, details of the claim for compensation and an analysis of the payment.

See CG72100 onwards, regarding the treatment, for capital gains purposes, of sums received as compensation for the compulsory acquisition of the capital element in land.

As regards receipts for grants of easements or wayleaves, see BIM55220.