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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Compensation: displaced tenants: is compensation chargeable CGT

To the extent that the compensation is payable under Section 37 L&TA 1954 it is exempt from Capital Gains Tax. This is so whether or not the landlord makes an additional payment, because for example the tenant, having received a notice to quit agrees to surrender his tenancy early rather than serve out the full period of his notice. Any additional sum paid relates to the surrender of the tenancy and remains chargeable to Capital Gains Tax.