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LEVEL CROSSING CLOSURE COMPENSATION

Money received to close level-crossing - which tax?

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Client has been offered money to close a level crossing on their land.  Would this be a capital gain even though they are not actually disposing of anything? Or would it be compensation - if so how would this be taxed?  Any suggestions welcome.

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By chicken farmer
15th Nov 2019 08:21

They are disposing of a right to cross the railway line probably some form of easement. So yes CGT is relevant

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Replying to chicken farmer:
Lone Wolf
By Lone_Wolf
15th Nov 2019 10:40

Agree with chicken farmer, it is a right attaching to the land, and so will be subject to CGT under TCGA 1992 s22,(1)(c) being the specific provision that taxes it.

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By The Dullard
15th Nov 2019 10:41

TCGA 1992, s 22, s 242 and s 247 all immediately spring to mind.

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RLI
By lionofludesch
15th Nov 2019 11:10

You don't have to be able to touch stuff to dispose of it.

Rights are just as disposable as a bit of land.

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By farm5
15th Nov 2019 19:49

Thanks for all your replies. If a capital gain, and the level crossing is used to get to farm land owned and farmed by the owner, would the gain be classed as a business asset and therefore eligible for rollover relief?

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Replying to farm5:
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By Tax Dragon
16th Nov 2019 08:04

TCGA 1992, s 155 immediately springs to mind.

Some tax law is easy to read.

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By Open all hours
15th Nov 2019 20:27

Thanks for posting this. Client is being paid to allow his land to be flooded on a permanent basis. He retains ownership of the lake ‘bed’ but will not be in a position to use it for anything. Guess he also has sold the rights to access and CGT again for him?
He is not being altogether cooperative on the project and apart from denying access to the land on a couple of occasions he did float the idea of selling the land to an American corporation with a relative as its president to prolong the negotiations just for a bit of sport. I think (hope) that idea has died a death.

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Replying to Open all hours:
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By Tax Dragon
16th Nov 2019 08:24

This isn't an equivalent scenario. The OP concerns a right of way over someone else's land. In your case, the client is being compensated for damage to his own land. He may be granting rights of access; I doubt he's giving up his own.

I hope he has decent advisors (eg legal) assisting with the negotiations. He may get a better outcome that way than with his current approach.

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