This is an edited version of a question sent a few weeks ago, now the matter has been clarified:
Following a fire at company premises a company have received insurance proceeds to purchase some new machines (not replacements) , just checking on the accounting/tax treatment of the transaction. The proceeds is dealt with by the insurer as the additional cost of working as a result of the fire. i.e. they have had to purchase new machines to make up for the lost production, the new machines will allow them to produce more, quicker.
£500k received and spent on new machines. The company now owns machinery valued at £500k so I believe the proceeds for accounting purposes should not be offset against the addition but instead posted to P & L.
New machines will sit in FA's.
However, to make it tax neutral should the £500k in P & L be deducted on tax comp and for CA purposes nothing included in relation to the asset purchase? Otherwise, the company will pay tax on the £500k @ 19% but only receive tax relief on the WDA's on the £500k.
I cant find anything in the legislation to back up this theory other than: