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HMRC internal manual

Capital Gains Manual

Capital sums derived from assets: section 22(1) TCGA 1992: extra statutory concession D33 amended from 27 January 2014: claims for extension of Paragraph 11

Paragraph 11 of extra statutory concession D33 was amended from 27 January 2014 so that only the first £500,000 of any gain accruing on the disposal of a right of action in circumstances that do not involve an underlying asset will, by concession, be treated as exempt.

The threshold of the exemption will be high enough to exempt the majority of cases where this kind of situation arises. However there will be some cases where the sum received exceeds the threshold. In all cases where the amended version of Paragraph 11 applies a claim can be made to HMRC for the amount above £500,000 to be treated as exempt.

Making a claim

A claim can be made to HMRC once the individual or company knows the amount of the sum to be received. This is to provide the individual or company with certainty regarding the tax treatment of the sum above £500,000 when they come to complete a tax return. If the individual or company chooses not to make a claim in advance then the claim should be made to HMRC with the tax return to which the claim relates.

The claim needs to be made in writing and include:

  • Name of the claimant
  • Address of the claimant
  • National Insurance Number or Unique Taxpayer reference of the claimant (if known) or the name and address of the claimant’s employer or business
  • How much compensation was received
  • Who will pay the compensation
  • The reason why the compensation has been received
  • The date the compensation was paid

If further information is needed to check a claim this can be requested

The claim can be sent to the HMRC office that normally deals with the individual’s or company’s tax affairs. Alternatively the claim can be submitted with the tax return for the period to which the claim relates.

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Time limit for making a claim

The time limit for making a claim is the same as the time limit for amending a tax return.

For individuals the time limit is the later of:

  • 12 months from the statutory filing date; or
  • 3 months from the receipt of a Notice to File. See SAM124165 for more details.

For companies the time limit is 12 months from the statutory filing date. See CTM93300 for more details.