CG15701 - Compensation: asset not lost or destroyed
Where an asset has not been lost or destroyed, but the owner receives compensation for the damage to the asset, s22(1) TCGA92 treats the compensation as a capital sum derived from the asset (see CG12945 and CG12948).
Where the compensation is used to restore the asset, however, the owner may claim under s23(1) TCGA92 for the receipt of the capital sum not to be treated as a disposal of the asset.
To come within s23(1) TCGA92, the following conditions must be met:
- the receipt must fall within s22(1)(a)-(d) TCGA92, and
- for capital sums received before 6 April 1996 the asset must not be a wasting asset (see CG15725 and CG76700), and
- the asset must not have been lost or destroyed, and
- one of the following conditions must be met -
- The capital sum must be wholly applied in restoring the asset, or
- The capital sum must be applied in restoring the asset except for a part which is not reasonably required for that purpose and which is ‘small’ in comparison with the total capital sum, or
- The capital sum itself must be ‘small’ in comparison with the value of the asset.
‘Small’ means the same as s122 TCGA92 (see CG57835). For a further explanation of what is small in this context and examples of the above see CG15703.
Wasting Assets
The rules relating to wasting assets (defined by s44 TCGA92, see CG76700) are more complicated:
For the rules relating to leases of land, see CG70772.
For the rules for any other type of asset, see CG15725.
Restored Assets: reduction of expenditure
Instead of being treated as a disposal, the capital sum is deducted from any allowable expenditure when you are computing the gain on a subsequent disposal of the asset.
See, however, CG12820 in cases where there have been a number of claims in respect of the same asset.