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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Compensation: compensation for deprivation of foreign assets: compensation received on or after 6 April 2010 (1 April 2010 for companies): TCGA92/S268B

TCGA92/S268B applies:

  • in relation to compensation received on or after 6 April 2010 for CGT purposes and
  • in relation to compensation received on or after 1 April 2010 for CT purposes.

But TCGA92/S268B does not apply in relation to a gain to which TCGA92/S268A (victims of National-Socialist persecution) applies, TCGA92/S268B (9).

Guidance on the treatment of compensation for deprivation of foreign assets received before 6 April for CGT purposes (or before 1 April for CT purposes) is given at CG13062.

Relief under TCGA92/S268B

Subject to a claim being made, TCGA92/S268B (1) provides that a gain shall not be a chargeable gain if it accrues to a person on receipt of a capital sum paid by way of compensation for the deprivation of a foreign asset provided that -

  • no legal redress was available when the deprivation occurred and
  • the capital sum is paid as the result of a relevant compensation award.

The payment of a capital sum by way of compensation for the deprivation of a foreign asset includes a payment as a result of the abandonment or extinguishment of rights in respect of the deprivation and the return of the asset itself, TCGA92/S268B (3).

“capital sum” means “money or “money’s worth”

“deprivation” includes deprivation resulting from either the seizure, confiscation, forfeiture, destruction, or expropriation of the asset or the disposal of the asset by a sale under duress for less than market value

“foreign asset” means an asset which was situated outside the UK at the time of the deprivation

“legal redress” means a right to recover the asset or to receive compensation for the deprivation

“a relevant compensation award” is an award or distribution made -

  • under an Order in Council made under the Foreign Compensation Act 1950 or arrangements established by the government of a territory outside the UK that are equivalent in effect to such an Order,
  • as a result of a recommendation of the Spoliation Advisory Panel (or any successor to that Panel) or a body outside the UK whose purposes and functions are equivalent to those of the Panel or
  • in settlement of a legal claim to the effect that the deprivation was unlawful or in accordance with an order to that effect made by a court, tribunal or other competent authority with jurisdiction to decide such a claim, TCGA92/S268B (2).

The Spoliation Advisory Panel was set up by the Secretary of State for Culture, Media and Sport in April 2001 in order to mediate claims in respect of art which was seized during the Nazi era which is now held in UK national collections, museums or galleries.

Relief under TCGA92/S268B (1) is not available in respect of a gain accruing to a person other than the owner of the foreign asset at the time of the deprivation if consideration had been given by that person or someone else for the right to receive compensation for the deprivation, TCGA92/S268B (4). Consideration given on an acquisition falling within TCGA92/S58 (1) (transfers between spouses and civil partners) and TCGA92/S171 (1) (transfers within a group) is to be ignored for this purpose.

Claim for relief

In order to obtain relief under TCGA92/S268B a claim must be made by the person receiving a capital sum by way of compensation for the deprivation of a foreign asset, TCGA92/S268B (6).

Restriction of relief where a loss has accrued to the claimant

If an allowable loss has accrued to a person as a result of -

  • the deprivation of a foreign asset or
  • the abandonment or extinguishment of rights in respect of the deprivation

any relief due to that person under TCGA92/S268B (1) on a gain accruing on the receipt of a capital sum paid by way of compensation (or the return of the foreign asset) applies only to so much of the gain as exceeds the amount of that loss, S268B (5).

Transfer of asset

A capital sum paid by way of compensation may take the form of the transfer of an asset or the return of the foreign asset itself. In such a situation the recipient should be treated as having acquired the asset for a consideration equal to its market value at the time of the transfer for the purposes of calculating a gain or loss on a subsequent disposal, TCGA92/S268B (7).