Revenue reverses CGT concession on damages
Published: Wednesday 9 April 2014
With effect from 27 January 2014, Revenue ESC D33 has been modified.
Previously, compensation derived from a right of action acquired by a claimant in connection with some matter which did not involve a form of property which was an asset for capital gains tax was exempt from CGT. This exemption has now been limited to £500,000.
The types of claim to which this cap will apply are unclear, but the Revenue notice dated 27 January 2014 uses the example of a case where professional advisers are said to have given misleading advice in a tax or other financial matter, or have failed to claim a tax relief in time.
Where the cap applies, there may be a need to gross up damages under the Gourley principle.
Whilst the Revenue notice may raise more questions than it answers, it is a development which is of interest to all those advising on professional negligence claims.