Corporation Tax Treatment of Insurance Claim Proceeds

This year our company van was written-off due to flooding. The insurance company settled the claim at £9k which is £3k lower than the net book balance sheet value of the van. HMRC Business Income Manual section BIM40755 suggests that the insurance proceeds should be treated as a Capital Receipt, ie. posted against the asset, resulting in a loss to the P&L of £3k in our case. However, I have had conflicting advice which suggests the insurance proceeds should be regarded as income, reduced by the £3k net loss. I would like to know the correct way to deal with this so I have the correct Corporation Tax computation. Thanks.

Hi ,
 

The receipt of insurance proceeds for the loss of the company van should be treated as a capital receipt, not income.  BIM40755 - Specific receipts: insurance recoveries: capital recoveries   refers to treating the proceeds as income where a company has already made a deduction for the loss of the asset against the profits of the trade. Please refer to guidance at :  BIM40751 - Specific receipts: insurance recoveries: whether trading receipts for more information on when insurance proceeds can be treated as income receipts. If the company has not claimed any deductions for the loss in the P&L, the insurance proceeds should be treated as a capital receipt for the disposal of the company vehicle. Thank you .