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Japanese Knotweed Compensation

Post Disposal Compensation payment

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I have a self employed flooring contractor who purchased a property in 2014 to refurbish and sell on, which he did so in early 2016.

The client included the gain in his 2016 Return and paid the CG liability arising.

In 2018 the new owner of the property lodged a claim against my client because Japanese Knotweed was discovered in the garden. My client could not produce a survey showing that the property was Knotweed free. After 18 moths of 'discussions' my client's solicitor recommended an 'out of court settlement' was the 'best' basis of settlement.  The 'agreed' amount of compensation was a little over £51,000, which my client duly paid.

There was no mention of the legal action until I commenced work on the 2019 accounts. My client is continuing in self employment.

Is it possible to claim relief in respect of the £51,000 compensation and if so how, please.

Many Thanks

 

 

Replies (9)

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By Wanderer
19th Aug 2019 14:19

VAt the Impaler wrote:

I have a self employed flooring contractor who purchased a property in 2014 to refurbish and sell on, which he did so in early 2016.

The client included the gain in his 2016 Return and paid the CG liability arising.

Why did he have a CG liability?
Thanks (2)
Replying to Wanderer:
By ireallyshouldknowthisbut
19th Aug 2019 15:23

Oops!

Sound like someone will be doing a restatement.....

Thanks (1)
Replying to ireallyshouldknowthisbut:
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By Tax Dragon
19th Aug 2019 15:52

It's not all bad news though. I'd venture that relief for the £51k will be easier to obtain under the income tax code than it would have been for CGT.

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Replying to ireallyshouldknowthisbut:
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By Wanderer
19th Aug 2019 15:53

Presumably the OP wouldn't have made a mistake:-
https://www.accountingweb.co.uk/any-answers/property-trading-0

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By Accountant A
19th Aug 2019 15:03

VAt the Impaler wrote:

purchased a property in 2014 to refurbish and sell on, which he did so in early 2016.

The client included the gain in his 2016 Return and paid the CG liability arising.

Who advised your client to report trading income as a capital gain?

Thanks (1)
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By airgeadagam
19th Aug 2019 16:27

That's a lot of compensation for a problem the new owner could have solved himself with a sprayer, a bottle of glyphosate and a bit of research. It might take 2 or 3 treatments over 2 or 3 years to break it's back but knotweed is just a plant, it's not immortal.
Now is the best time to spray - just after flowering. If it was a typical-sized garden I would have been happy to treat it if I lived locally for about £3,000.00.

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Replying to airgeadagam:
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By VAt the Impaler
21st Aug 2019 15:36

Brilliant response .... though perhaps you should save such 'advice' for queries raised on Gardener's Question Time.

You may well be able to spray Knotweed... and indeed as you say it is 'just a plant' ... though one that has managed to penetrate an partially destroy the new owner's foundations and which required a JCB to remove nearly 1/2 meter of topsoil from the entire garden...

Any ideas on how 'we' can claim tax relief for the compensation, (which incidentally was initially a little over £100k), .... please

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Replying to VAt the Impaler:
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By Wanderer
21st Aug 2019 15:51

VAt the Impaler wrote:

Any ideas on how 'we' can claim tax relief for the compensation, (which incidentally was initially a little over £100k), .... please

You need to respond to the queries raised by other posters before anyone can make a start on that.
Thanks (1)
Replying to VAt the Impaler:
By Duggimon
22nd Aug 2019 13:59

VAt the Impaler wrote:

Any ideas on how 'we' can claim tax relief for the compensation, (which incidentally was initially a little over £100k), .... please

As others have said, the starting point for getting the answer to this is for you to tell us why this apparent trading activity was treated as a capital gain.

Once we know the reason for that it might become clearer whether or not any relief for the compensation payout is available.

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