HC Deb 12 February 1998 vol 306 cc378-9W
23. 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]

35. 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.