A sum received under a policy insuring a fixed asset against
damage or loss is a capital receipt. However, any allowable
expenditure incurred in making good the damage or loss by repair,
renewal or by replacement should be reduced by the amount
recoverable (ICTA88/S74 (1)(l)).
If the reduction is effected in the trader's accounts by
crediting the recovery as a trading receipt when received, rather
than by deducting the net cost of repairs etc when incurred, no
objection need be made.
If the insurance recovery is treated as a disposal value for
capital allowance purposes (see CA23250) it should not be deducted
from the repairs etc expenditure.
