Taxes Consolidation Act 1997 section 535

Disposals where capital sums derived from assets

Section 535 treats the derivation of a capital sum from an asset as a disposal for capital gains tax purposes, even where no asset is acquired by the person paying the sum.

• A "capital sum" is any money or money's worth that is not excluded from the consideration taken into account in computing a chargeable gain.
• A disposal arises where a capital sum is derived from an asset, including compensation for damage or loss, insurance proceeds, sums for forfeiture or surrender of rights, and consideration for use or exploitation of an asset.
• The rights of the insurer or the insured under a policy of insurance (other than a life assurance policy) do not constitute a chargeable asset, so no gain can arise on their disposal.
• However, if insurance rights are assigned after the insured event has occurred, the assignment is treated as a disposal of an interest in the underlying asset, preventing the creation of artificial losses.