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Capital Gains Tax is charged on the disposal of assets. This is extended by s22 TCGA92 which treats capital sums derived from an asset as a disposal of that asset (see CG12940+). This includes capital sums received as compensation for damage to an asset, or for the loss or destruction of an asset.

In certain circumstances s23 TCGA92 relieves any charge to Capital Gains Tax where such compensation is received and is applied in restoring or replacing the asset damaged, lost or destroyed. Relief is available where

an asset has been damaged, without being destroyed, and the compensation is applied in restoring the asset, see below

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