CG15742 | Compensation: assets damaged/destroyed: destroyed buildings

s23(6) TCGA92

In law a building is part of the land on which it stands (see CG70205). The building and the land are a single asset. So the destruction of a building cannot be the loss or destruction of an asset because the land remains.

If a building is destroyed and rebuilt on the same site, the claimant can consider relief under s23(1) in that the land is restored. However, if the owner chooses to have a replacement building constructed on a different site, s23(1) doesn't apply. In addition, relief would not arise under s23(4), without special provision, as that section refers to an asset having been lost or destroyed.

To deal with this, s23(6) and (7) TCGA92 states that

• where a building is destroyed or irreparably damaged, and

• all or part of any capital sum received is applied in constructing or acquiring a replacement building situated elsewhere, then

• for the purposes of s23(4) and (5), the old and new buildings are regarded as being assets that are separate from the land.

This means the old building can be treated as destroyed.

The compensation received is for restoring the building, not the land. If a claim under s23(4) TCGA92 is made in respect of a building, then you make any just and reasonable necessary apportionment of cost between the building(s) and the land (applying s52(4) TCGA92), before you look at the no gain/no loss provisions.