Malcolm Finney looks at two unusual areas of the capital gains tax legislation.
Perhaps surprisingly, where an asset is destroyed or damaged, a chargeable disposal occurs for capital gains tax purposes.
Capital sums derived from an asset are treated as a deemed disposal of that asset (TCGA 1992, s 22). This includes capital sums received as compensation for damage to an asset, or for the loss or destruction of an asset.
Destroyed asset
Use of compensation proceeds
In essence, where reinvestment occurs, this reduces the amount of the chargeable gain, the extent of the reduction depending not only upon whether all or only part of the compensation is reinvested, but also whether an appropriate claim is made. ;<
