Is an Insurance Payout taxable income ?

Is an Insurance Payout taxable income ?

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If a business receives an insurance payout for damaged stock which has been thrown away, is the money/payout received in respect of that claim classed as income which is subject to corporation tax?

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Chris M
By mr. mischief
12th Dec 2011 21:01

Normally yes

Normally this is taxable income, because normally the premiums paid will have been claimed as a business expense and hence attracted corporation tax relief.

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By Paul Soper
12th Dec 2011 22:53

Compensation for lost stock

The general rule for any compensatory payment is that the tax treatment follows that of the sum it is compensating for.  As compensation for loss of stock it is brought in as though the consideration for the disposal of the stock and in the hands of a trader, trading profit.  Compensation for the loss of a capital asset taxed as proceeds for the disposal or part disposal of the asset in question.  Insurance premiums against loss of assets are deductible from trading profit but the compensation would still be taxable as the disposal proceeds.

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By Richard Willis
13th Dec 2011 10:19

BUT

as the compensation SHOULD only be equivalent to the actual loss there should be no overall effect as the loss will be allowable.

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By petersaxton
13th Dec 2011 17:02

Net of tax

I thought compensation was paid net of tax.

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