½Û×ÓÊÓÆµ

Tax treatment of earn-outs and deferred consideration

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance

Tax treatment of earn-outs and deferred consideration

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance
imgtext

The consideration received by an individual on disposal of their shares in a company will often be simply in the form of cash, payable at the time of the transaction. However, there may also be some form of deferred consideration, which is often used as an incentive to tie key individuals into continuing to work for the business after the disposal for a certain period of time. In such cases the deferred element of the consideration may either be known at the time of the transaction (ascertainable) or it may be quantified at a later date (unascertainable). Unascertainable consideration is typically calculated using a formula based on two / three years post-acquisition profits. An arrangement such as this is known as an ‘earn-out’.

The way in which the consideration for the sale of shares is structured determines when the capital gains tax liability of the individual falls due. There are special rules allowing the payment of tax in instalments in certain circumstances, which are covered at the end of this guidance note.

Most

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+â„¢
Powered by

Popular Articles

Real estate investment trusts (REITs)

Real estate investment trusts (REITs)Introduction to REITsA real estate investment trust (REIT) is in fact not a trust at all, it is a company which qualifies for special tax treatment under CTA 2010, Part 12. REITs are similar in many ways to collective fund vehicles (such as unit trusts) in that

14 Jul 2020 13:04 | Produced by Tolley in association with Rob Durrant-Walker of Crane Dale Tax, part of AMS Group Read more Read more

Winding up a trust ― legal, administrative and compliance issues

Winding up a trust ― legal, administrative and compliance issuesOverviewWhen winding up a trust, there are legal formalities and compliance issues that need to be dealt with, as well as IHT and CGT consequences that flow from the termination. This guidance note considers when and how a trust comes

14 Jul 2020 14:01 | Produced by Tolley Read more Read more

Non-business expenses

Non-business expensesIntroductionIn order for an expense to be tax deductible it must be incurred because of an employee’s employment. Any non-business related expense is, therefore, not relievable except in some very particular circumstances.This guidance note deals with three separate issues. The

14 Jul 2020 12:16 | Produced by Tolley Read more Read more