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HMRC internal manual

Capital Gains Manual

Compensation chargeable: displaced tenants: business tenancies

The compensation will however be within the scope of Capital Gains Tax in the following circumstances.

  • If the notice to quit, or the notice opposing a request for a new tenancy, specifies grounds other than those contained in Section 30(1)(e), (f) or (g) L&TA 1954, see CG72334, the tenant will not be entitled to compensation under the L&TA unless he applies to the Court for a new tenancy and fails because the Court upholds one of the grounds in Section 30(1)(e), (f) or (g) L&TA 1954. Any compensation paid in such cases will not derive from the statute and must therefore derive from the disposal of the tenancy.
  • If the tenancy agreement itself contains a provision for the payment of compensation on termination of the tenancy.