Taxation of Chargeable Gains Act 1992 section 23

Compensation and insurance money

Section 23 modifies how compensation and insurance proceeds interact with chargeable gains calculations where only part of a gain is a chargeable gain, ensuring that any relief for reinvestment is based on the chargeable portion rather than the total gain.

• When compensation or insurance money is received for an asset, it is not treated as a disposal if the proceeds are reinvested in a replacement asset.
• Where only part of a gain qualifies as a chargeable gain, any reduction in the gain for reinvestment purposes is limited to the chargeable portion, not the whole gain.
• The cost base of the replacement asset is adjusted downwards only by the amount of the chargeable gain that has been proportionately reduced, rather than by the full gain reduction.
• This rule prevents an excessive reduction being applied when pre-existing reliefs or allowances mean that not all of a gain is subject to capital gains tax.