Insurance receipts taxable for company?

Insurance receipts taxable for company?

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Company suffered large loss of stock, machinery due to major fire but received an insurance payout for;

  1. Loss of stock
  2. Loss of equipment
  3. Loss of gross profit
  4. Recompense for increased cost of working.

My understanding is that

1 is a taxable receipt but as the stock purchase is equal tax neutral

2. is a deemed disposal for CGT and the receipt less cost equals a chargeable capital gain

3. Is a taxable receipt

4. is a taxable receipt but as a cost associated with it is tax neutral

Am I correct? Worried as a major tax impact which client must allow for and do not want to be wrong. Research throws up some ambiguity. There are no other factors like property, connected persons etc. applicable.

Replies (3)

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By Steve Kesby
09th Aug 2012 13:30

Agree, except on 2

For 2 I'd have expected the receipt to be treated as proceeds in your capital allowances computation, possibly causing a balancing charge, and probably no CGT effect.

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By User deleted
09th Aug 2012 15:09

Agree, including 2

The proceeds should indeed be taken to the capital allowances pool, but restricted to cost. If, as the OP implies, the proceeds exceed cost you have a chargeable gain (all assuming of course that the equipment was eligible for capital allowances).

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By User deleted
09th Aug 2012 15:42

And to expand on point 2

Chattels relief may be available.

Since the taxpayer is a company, indexation should be available to reduce any chargeable gain.

 

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