§ 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 379W restricted trading opportunities, capital loss, or personal hardship is a matter for agreement between the recipient and the Inspector of Taxes.