Compensation and insurance money

You must pay CGT if you receive compensation or insurance money, however if you use the money to replace an asset you may defer the CGT.

The compensation you get reduces the cost of the asset. It can also reduce the replacement cost of the asset if you have lost it or it was destroyed.

Example:

Matthew receives compensation from his insurance for damage resulting from a recent flood. If he uses the money to repair damage to the property he can defer the CGT payment until the property is sold.