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HMRC internal manual

Capital Gains Manual

Deferred consideration: unascertainable deferred payments

The consideration will be unascertainable if events which establish the AMOUNT do not occur until after the date of the disposal.

Examples of unascertainable payments are

  • the agreement for the sale of shares in a company provides for an initial payment of £100,000, plus three further payments equal to the excess of the company’s profits over £300,000 in each of the three years following the date of the contract, or
  • the agreement for the sale of land provides for a consideration of a capital sum payable in three annual instalments to be calculated by reference to the tonnage of land fill dumped on that site in the three years after the date of the contract.

The presence of a maximum amount to be paid does not imply that the consideration is ascertainable in the maximum.

An example would be

  • the agreement for the sale of an asset provides for an immediate payment of £250,000 plus a further payment of half the profit made by the purchaser on a subsequent sale of the asset, subject to a maximum of £500,000 on the total to be paid.

It should be noted that payment of tax by instalments is NOT appropriate when you are considering unascertainable deferred payments. The taxpayer has received an asset i.e. the right to receive future payments. This asset is not received in instalments. Similarly relief under TCGA92/S48 is not due as the vendor has received the `right’; it cannot become irrecoverable.