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Demolition man

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07 January 2009
Issue: 4188 / Categories: Forum & Feedback , Income Tax
Part of an industrial unit collapses, meaning that it must be demolished. The demolition work results in further damage and compensation claims. What tax relief can be claimed on the demolition and compensation costs and are these revenue or capital expenses? Providing additional information and supporting references may be necessary.

A client of mine owns a warehouse let out as five small individual units. The gable end of the building collapsed and a demolition contractor was called in by the client to make good.

The contractor made the building safe by reducing the end unit to ground level.

During the course of this work the contractor damaged an adjacent tenanted unit which meant that the tenant could not continue his business.

My client disputed the contractor’s invoice and issued a counter claim for negligence.

This has now been settled and my client has paid the original invoice plus legal costs.

The tenant of the adjacent unit issued a claim against my client for loss of profits.

This has been settled and my client has made a substantial payment which is not analysed but is described as compensation and interest. A payment for legal costs will follow.

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