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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Compensation: asset lost or destroyed

TCGA92/S23 (4)

Where an asset has been entirely lost or destroyed, then that is treated as a deemed disposal of the asset, TCGA92/S24 (1), see CG13120.

Where the owner receives compensation for the loss etc. of the asset, then that will be treated as a capital sum derived from the asset, TCGA92/S22 (1)(a), see CG12948.

Where the compensation is used to acquire a replacement asset, however, the recipient may claim under TCGA92/S23 (4). CG15742+ tell you about this.

To come within Section 23(4), the following conditions must be met:

  • the receipt must fall within Section 22(1)(a) and
  • the original asset must have been lost or destroyed


  • for capital sums received before 6 April 1996 the original asset was NOT a wasting asset, see CG15725


  • the compensation etc must be used to acquire a replacement asset within a specified period, see CG15744


  • for capital sums received before 6 April 1996 the replacement asset must not be a wasting asset, see CG15725.

If all the conditions in CG15740 are satisfied, then the claimant is treated as if no gain or loss had arisen on the disposal of the original asset. Instead, the cost of the replacement asset is reduced by the amount of the chargeable gain which would have arisen on the original asset.

This gain is computed by taking the consideration as the capital sum received as compensation etc. plus any scrap value of the original asset.