Corporation Tax Act 2009 section 103

Sums recovered under insurance policies etc.

Section 103 deals with the treatment of capital sums recovered under insurance policies or contracts of indemnity where a deduction has already been claimed for the underlying loss or expense in the trade profits calculation.

• Where a trading loss or expense has been deducted in calculating trade profits and a sum is recovered under an insurance policy or contract of indemnity, that recovered sum must be brought back into the profit calculation as a receipt
• This rule applies only to recovered sums that are not of a revenue nature (i.e. it applies to capital recoveries); revenue recoveries are dealt with under normal trading income principles without any special provision
• The amount brought into account as a receipt is capped at the amount of the original deduction, so the company is never taxed on more than it previously deducted
• The timing of recognising the insurance recovery follows the accounting treatment, meaning the receipt is recognised in the period in which it is received rather than requiring an adjustment back to the period of the original loss