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HMRC internal manual

Capital Gains Manual

Capital sums derived from assets: section 22 (1)(c) TCGA 1992: forfeiture or surrender of rights

Section 22(1)(c) TCGA 1992 deems a disposal when the owner of an asset receives a capital sum, see CG12980, in return for:

  • forfeiting or surrendering his rights over the asset, or
  • refraining from exercising his rights over the asset.

Guidance on the circumstances in which a ‘right’ is an asset for CG purposes is given at CG12000+.

Examples of capital sums within section 22(1)(c) include (but are not limited to):

  • payments received in consideration of giving up contractual rights, see CG13000;
  • payments for entering into a covenant which restricts the recipient’s actions in relation to an asset, see CG68060
  • release of an option for consideration (Welbeck Securities Ltd v Powlson (Inspector of Taxes) 60TC269.

In certain circumstances, and subject to a claim being made, section 23 TCGA 1992 prevents the receipt of a capital sum within section 22(1)(c) from being treated as an occasion of a disposal where the receipt is applied in restoring a damaged asset or replacing an asset which has been lost or destroyed, see CG15700+.