9.7 Compensation and insurance payouts – building damaged or destroyed
9.7.1 Starting point – capital sums received as compensation are taxed on receipt
It is not unknown for disaster to strike. Some random freak event could occur, causing untoward damage to the property, such as a flood, fire, or lightning strike. The building may even be destroyed completely. If the landlord is insured, he may be able to claim a payout to help defray the cost of making good the damage. However, it may come as a shock to discover that the payout is taxable.
Under TCGA 1992, s. 22, a capital sum received in respect of damage or injury to the property is taxed on the basis that it is a capital sum derived from an asset. This includes the following scenarios: