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Treasury

Answer

Mr. Hayes: To ask the Chancellor of the Exchequer what representations he has received about the tax treatment of compensation awarded to former tenants of the land settlement associations. [27224] Mr. Paice: To ask the Chancellor of the Exchequer what representations he has received about the tax treatment of compensation for former tenants of the land settlement associations. [27236] Mr. Darling: Representations have been made querying the raising of a tax charge in respect of out of court compensation paid by MAFF to a number of former tenants of the Land Settlement Association. It has been explained that under tax law, compensation received for a capital loss, or for personal hardship, is not liable to income tax, but where a payment is made to compensate a restriction of trading opportunities, or to fill a hole in profits, it is taxable as trading income. And that the nature of a compensation payment in an out of court settlement is decided by the evidence of the claims for compensation. Just how much of a compensation payment received is for restricted trading opportunities, capital loss, or personal hardship, is a matter for agreement between the recipient and the Inspector of Taxes.

Secondary information

Type

Written question

Reference

27236; 306 c378-9W

Session

1997-98

Question not reached

Yes

Subjects

Compensation Taxation Tenants Smallholdings Land Settlement Association Ministry of Agriculture, Fisheries and Food