ABSTRACT
This is a capital sum received upon the disposal of an asset; as such, it is subject to capital gains tax. Whether any tax is payable will depend upon the amount of gain: this is computed in accordance with the Taxation of Chargeable Gains Tax Act 1992: for relief, see below. The compulsory purchase rule, which treats the total compensation payable (for land taken, severance and injurious affection, and for disturbance and other matters under rule (6)) as one sum for the taking of the land, is disregarded for capital gains tax purposes, and an apportionment of the sum paid as between capital, loss of goodwill or disturbance is made: see section 245(1). Payment for severance is treated as a part disposal and therefore a proportion of allowable costs can be offset against the disposal proceeds: sections 42 and 245(2) of the 1992 Act. If in the unlikely event the sale of part of a taxpayer’s land is to a body with powers of compulsory purchase at an undervalue, the small part disposal rule may apply. The tax payer can elect to deduct the proceeds from the base costs of the holding if the proceeds are less than 5 per cent of the value of the holding: see section 243 of the 1992 Act. Where compulsory acquisition takes place without a contract, the date of the disposal for capital gains tax purposes is the date compensation is agreed or determined: see section 246 of the 1992 Act.
