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The terms of HMRC’s concession covering capital gains tax (CGT) on damages have been reduced to make only the first £500,000 of compensation exempt.
The terms of HMRC’s concession covering capital gains tax (CGT) on damages have been reduced to make only the first £500,000 of compensation exempt.
The change to extra-statutory concession (ESC) D33 applies from 27 January 2014 and means the Revenue will not normally provide relief above half-a-million pounds – but an individual taxpayer who receives compensation over the amount can make a claim in writing if he or she thinks the sum should not be chargeable to CGT.
A claim can also be made on a self assessment or CT600 return.
ESC D33’s revision reflects a clarification of the scope of the concession, taking into account the limits of the taxman’s collection and management powers in this area following the High Court case of Zim Properties v Proctor [1985] STC 90, according to the tax department.
The chargeable gain will be worked out by taking into account allowable costs, reliefs due, and unused allowable capital losses. It will be added to other chargeable gains in the year.
HMRC say they will issue a consultation document later this year to gather views on what should be included in legislation to replace D33. Guidance on the concession in the Capital Gains Tax Manual will be amended in the meantime.
Compensation for personal injury is not affected.
