BIM40125 - Receipts: compensation &
damages: other than trading contracts
Relevant considerations
The decisions in the following cases help to illustrate some of
the relevant considerations:
- You should regard compensation for loss of
profits due to negligence as a trading receipt, whether or not
there is a contractual relationship between the parties.
Compensation received from professional advisers was treated as
such in Gray v Lord Penrhyn [1937] 21TC252 and Donald Fisher
(Ealing) Limited v Spencer [1989] 63TC168.
- Compensation on the requisition of stock
by a public authority was, the element of compulsion
notwithstanding, held to be a trading receipt in CIR v Newcastle
Breweries Ltd [1927] 12TC927.
- Compensation in return for accepting some
restriction to the scope of the business activities (restrictive
covenants) was held to be capital in Margerison v Tyresoles Ltd
[1942] 25TC59 and Higgs v Olivier [1952] 33TC136 (see
BIM35600).
- By way of contrast, payments made under
European Commission schemes in order to induce farmers to change
from one form of production to another were held to be revenue
receipts in White v G & M Davies [1979] 52TC597 (see BIM35600)
and CIR v Biggar [1982] 56TC254 (see BIM35600), even though the
scheme involved restrictions on the farming activities.
