CG69030 | Insurance: risks of damage, loss or depreciation of assets

A payment received by the insured person under a policy of insurance covering the risk of damage to, or loss or depreciation of, assets is a capital sum derived from those assets within section 22(1) of the Taxation of Chargeable Gains Act 1992 (see CG12940P).

Before 20 December 1974, the rights of the insured under a policy (except a life insurance policy) were not chargeable assets. As a result it was possible, as in the case of CIR v Montgomery 49 TC 679, for the insured to avoid liability on capital gains on an insurance recovery by assigning his/her right to it (for example, for an amount equal to the compensation). With effect from 20 December 1974, this position was remedied: the rights of the insured under a policy of insurance for damage to, or loss or depreciation of, assets are to be treated as chargeable assets to the extent that the insured assets are themselves chargeable assets.