Finance Act 1994

Chargeable gains: receipt of compensation or insurance policies

3 (1) Subsection (4) of section 23 of the Gains Act (adjustments where compensation or insurance money used for purchase of replacement asset) shall have effect in accordance with sub-paragraph (3) below in any case where—

(a) there is a relevant transfer such that—

(i) any capital sum received by the predecessor by way of compensation for the loss or destruction of any asset, or under a policy of insurance of the risk of the loss or destruction of any asset, becomes available to the transferee; or

(ii) any right of the predecessor to receive such a sum is transferred to the transferee, and the transferee receives that sum; and

(b) the transferee acquires an asset in circumstances where—

(i) had there been no such relevant transfer, and

(ii) had the predecessor acquired the asset by the application of that sum,

the predecessor would be treated for the purposes of that subsection as having so acquired the asset in replacement for the asset lost or destroyed.

(2) Subsection (5) of that section (adjustments where a part of any compensation or insurance money is used for the purchase of a replacement asset) shall have effect in accordance with sub-paragraph (3) below in any case where—

(a) there is a relevant transfer such that—

(i) any capital sum received by the predecessor by way of compensation for the loss or destruction of any asset, or under a policy of insurance of the risk of the loss or destruction of any asset, becomes available to the transferee; or

(ii) any right of the predecessor to receive such a sum is transferred to the transferee, and the transferee receives that sum; and

(b) the transferee acquires an asset in circumstances where—

(i) had there been no such relevant transfer, and

(ii) had the predecessor acquired the asset by the application of all of that sum except for a part which was less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of the asset lost or destroyed,

the predecessor would be treated for the purposes of that subsection as having so acquired the asset in replacement for the asset lost or destroyed.

(3) In a case falling within sub-paragraph (1) or (2) above, subsection (4) or, as the case may be, subsection (5) of section 23 of the Gains Act shall have effect as if the transferee and the predecessor were the same person, except that—

(a) in a case falling within sub-paragraph (1)(a)(i) or (2)(a)(i) above—

(i) any claim under the subsection in question must be made by the predecessor and the transferee; and

(ii) any adjustment to be made in consequence of paragraph (a) of that subsection shall be made for the purposes only of the taxation of the predecessor; and

(b) in a case falling within sub-paragraph (1)(a)(ii) or (2)(a)(ii) above—

(i) any claim under the subsection in question must be made by the transferee; and

(ii) any adjustment to be made in consequence of paragraph (a) of that subsection shall be made for the purposes only of the taxation of the transferee.