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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Compensation: displaced tenants: is compensation chargeable

If the compensation is not chargeable to Income Tax, it will be chargeable to Capital Gains Tax provided that it arises from the disposal of an asset. If the tenancy agreement itself provides for the payment of compensation on the termination of the tenancy, then the compensation will derive from the tenancy and will be chargeable to Capital Gains Tax. However, there are circumstances in which the compensation does not arise from the disposal of an asset and is therefore exempt from Capital Gains Tax.