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HMRC internal manual

Capital Gains Manual

Compensation: displaced tenants: general

Compensation is often received by displaced tenants. Usually such compensation will onlybe received if the tenant is compelled to leave the land in question, either because theperiod of the tenancy has come to an end or because the landlord has issued a notice toquit. The main ways in which the compensation may arise are as follows.

  • Under the terms of the tenancy agreement itself (this is relatively rare).
  • Under some statutory provision.
  • Where the landlord and tenant agree that the tenancy should end in return for compensation being paid to the tenant.
  • Under a code of practice within a particular industry (for example in the brewing industry).

The taxation treatment of the compensation will depend mainly on which of the abovecircumstances applies.