Readers Forum: Insurance payment

08 June 2021

Issue: 4795 / Categories: Forum & Feedback

Tax on insurance payment for delayed roof repairs.

We act for a company that was hit by a tornado that damaged the roof. The insurance assessor awarded a full repair. However because the company makes all the yellow plastic bins for disposing of Covid needles it is not practicable for the factory to close for repairs.

The insurance company is worried about being responsible for the roof that remains unrepaired and subsequently fails so it offered the directors a non-refundable cheque for £2m for the roof regardless of whether it ended up costing less than this.

We need to know how the tax would be calculated on this payment. According to my research it seems that this would be stage payments that match with the repairs so there is a part capital gains tax disposal of the freehold but then a reinvestment.

Query 19 756 – Confused.

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