Readers' forum : Bad management

My client added some funds to an investment portfolio some years ago giving specific instructions on how it should be invested. Unfortunately the investment managers failed to follow the instructions and the money underperformed as a result. My client has demanded compensation for mandate breaches. This is being calculated on the basis of the difference between the performance of the funds in which the money was actually invested and the funds that were requested.

Apparently the difference will be substantial and a sum of about £20 000 has been mentioned. If this is paid to my client as a lump sum how is that taxed? Will this be treated as a capital sum derived from an asset? If so is there any base cost? Given that this amount appears to derive from a portfolio that will have changed over time it seems difficult...