Anyone in receipt of compensation of more than £500,000 will, from 27 January 2014, need to make a claim in writing to HMRC if they believe more than just the first £500,000 should be exempt from capital gains tax (CGT) under extra statutory concession, ESC D33 (CGT on compensation and damages).

From 27 January 2014:

only the first £500,000 of this kind of capital compensation will be exempt;

HMRC will not normally provide relief above that amount; but,

anyone who receives compensation of more than that amount and thinks it should not be chargeable to CGT can make a claim in writing to HMRC. There is no guarantee that a claim will be upheld but HMRC will consider whether further relief can be given.

The change reflects a clarification of the scope of the concession taking into account the limits of the Commissioners of Revenue and Customs collection and management powers in this area following the High Court case of Zim Properties v Proctor.

The claim can be made as part of self-assessment or the CT600 return at the usual time. However, claimants want to know for certain whether all of the compensation or just the first £500,000 is exempt, they can make a claim by writing to HMRC as soon as they know the size of their award.