Taxation of Chargeable Gains Act 1992 section 268B

Compensation for deprivation of foreign assets

Section 268B provides relief from capital gains tax where a person receives compensation for being deprived of an asset situated outside the United Kingdom, provided no legal redress was available at the time and the compensation arises from a qualifying award.

• Compensation received for the deprivation of a foreign asset is exempt from capital gains tax where no legal redress was available at the time and the payment results from a relevant compensation award, such as one made under the Foreign Compensation Act 1950, by the Spoliation Advisory Panel, or in settlement of a legal claim that the deprivation was unlawful
• The exemption covers not only monetary compensation but also the return of the asset itself and payments arising from the abandonment or extinguishment of rights relating to the deprivation — however, it does not apply where someone has paid for the right to receive the compensation, unless the transfer was between spouses, civil partners, or companies within a group
• Where an allowable capital loss has already been recognised in connection with the deprivation, the exemption applies only to the portion of any gain that exceeds that loss, and a formal claim must be made to obtain the relief
• If compensation takes the form of an asset transfer or the return of the original asset, the recipient is treated as having acquired it at market value at the time of transfer for the purposes of any future disposal, and this relief does not apply where the separate exemption for victims of National-Socialist persecution under section 268A already covers the gain