The receipt of compensation or insurance proceeds in respect of the entire loss, destruction or extinguishment of an asset is a disposal for capital gains tax purposes1. The receipt is treated as the consideration for the disposal of the asset. For capital sums derived from assets generally, see C1.319.
However, there is a potential difficulty because the occasion of the loss etc is itself deemed to be a disposal of the asset by TCGA 1992, s 24(1). The question therefore arises as to whether there are in fact two disposals, under both s 22(1) and s 24(1); ie whether the receipt of the compensation should be treated as a second disposal or simply as the receipt of consideration in respect of the deemed disposal. See C1.320 for loss and destruction of assets generally.
From the point of view of computation, the two analyses would result in different timing of gains and losses and also the indexation allowance (where relevant2) would be different in each case. In the Ch D decision
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