Taxation of Chargeable Gains Act 1992 Schedule B1 paragraph 6

Damage to a dwelling

Schedule B1 paragraph 6 deals with the treatment of capital sums received as compensation for damage to a dwelling, and how such receipts interact with the private residence relief provisions.

• Where a capital sum is received as compensation for damage to a dwelling that qualifies for private residence relief, special rules apply to the tax treatment of that receipt.
• If the capital sum received is used to restore the damaged dwelling, the receipt may be disregarded for capital gains tax purposes, meaning no chargeable gain arises.
• The provision ensures that homeowners who receive insurance or other compensation payments for damage to their main residence are not penalised with a tax charge, provided the funds are applied to restoring the property.
• This paragraph was introduced by Finance Act 2019 as part of the reforms to the private residence relief rules contained in Schedule 1 to that Act.