May I put to the Financial Secretary a point which arises in conjunction with Clause 21(3). The hon. and learned Gentleman was not here when we had a somewhat lengthy discussion on that subsection and his right hon. Friend gave me an assurance that he would consider my proposal that where insurance money was received by a person in respect of the total destruction of some chattel and that chattel was replaced by a similar chattel, with that money, it should not give rise to a capital gain. We shall need to consider the point between now and Report, and it would be helpful if he would elaborate a little on the point to explain that subsection and subsection (6) of this Clause.
We shall wish to look at subsection (6) in the light of the undertaking. Subsection (3) of this Clause provides that the destruction or extinction of an asset shall be treated as the disposal of the asset even though no capital sum by way of compensation is received in respect of the asset. It is an extension of the concept of disposal, for it treats as disposal an occasion on which there is no change of ownership of the asset and no capital sum is received in respect of it. If a person owns an uninsured asset which is entirely destroyed, or for any other reason an asset ceases to have any value, it is clearly right that at the point at which the asset ceases to have value that should be the occasion on which to strike the capital account and to give relief for any loss which might have been incurred.
The fact that no capital sum has been received in respect of the asset is insufficient reason for continuing loss relief indefinitely. Subsection (6) lays down a special rule for the kind of insurance case where the asset is damaged and the compensation is used to restore the asset. In a situation of that kind, the receipt of the compensation is not to be treated as a disposal of the asset giving rise to a loss, but the amount of the compensation is to be treated as reducing the acquisition cost of the asset.
There is one point in subsection (3) which provides that if an asset is destroyed, dissipated, or extinguished, that shall constitute the disposal of the asset, but I do not think that this covers burglary. In that case, the asset is not destroyed, dissipated, or extinguished, but I imagine that the Government want such a misfortune to be compensated and I suppose that this is a drafting point.