negligence, not for breach of contract; it is negligence claims which are a very common form of Zim style rights.)
1.6 In addition to statutory rights, there are therefore several alternative ways that a sum received in settlement of a dispute may be viewed:
1.6.1 it may derive from an underlying asset;
1.6.2 it may derive from a contractual right of action;
1.6.3 it may derive from a non-contractual right.
1.7 ESC D33 was introduced in order to provide a concessionary treatment instead of the strict treatment determined by the Zim case. It applies to non-contractual rights only.
1.8 Where the non-contractual right of action arises because the claimant suffered some loss or disadvantage in connection with a form of property, any gain or loss may by concession be computed as if the compensation derived from that asset. This concession therefore enables the transaction to take on the characteristics of the asset. The transaction is placed firmly within Section 22, TCGA as relating to that asset. 1.9 Under the concessionary treatment of ESC D33, if an estate agent or solicitor was negligent with the result that a sale of a principal private residence did not take place, or took place at a lower amount than might have been expected, the payment made by the professional concerned to the client will be deemed to derive from the principal private residence. Therefore if the gain on the disposal of the principal private residence is not subject to capital gains tax, by virtue of Section 223, TCGA, then the net proceeds from the negligence claim should also not be subject to capital gains tax. 1.10 If there is no underlying asset, such as with a claim against an accountant for failing to claim a tax relief in time then, under the concessionary treatment, any gain accruing on the disposal of the right of action will be exempt from capital gains tax. “The principle of Zim Properties Limited is not regarded as applicable to payments made by the vendor to the purchaser of an asset under a warranty or indemnity included as one of the terms of a contract of purchase and sale. Where such a contractual payment is made, then the cost of the asset to the person acquiring it will, on the occasion of a further disposal be reduced by the sum received. The sale proceeds of the person who makes (or is treated by TCGA 1992 s 171A as making) the disposal of the asset are adjusted under TCGA s 49 in respect of the sum received. Where a warranty or indemnity payment is not made in accordance with the terms of the contract, the principle in Zim Properties may apply and the sums received by the vendor or purchaser as appropriate may be identified as capital sums derived from the asset, or from the right of action, depending on the facts of the case.” 1.11 There is a further clarification in ESC D33 to deal with payments made by the Seller to the Buyer under a warranty or indemnity. ESC D33 reads as follows:
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