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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Deferred consideration: shares and securities: introduction

This section deals with disposals of shares or debentures of a company (the original company) where

  • some or all of the proceeds are not paid immediately,


  • the later payments may include an issue of shares or debentures of another company.

It deals with cases where further amounts are potentially payable in shares or debentures of another company and not just those where such amounts are actually paid. It explains how TCGA92/S138A can result in such a right to deferred unascertainable consideration being treated as a security of the other company. So that the no disposal/same asset share exchange rules can apply and gains do not arise when the right is conferred. Briefly, the history of the legislation is that

  • TCGA92/S138A superseded ESC/D27, which ceased to apply from 26 November 1996.
  • TCGA92/S138A preserves any capital gains charges deferred by a claim for ESC/D27 to apply.
  • Rights conferred after 9 April 2003 automatically count as securities if the conditions of TCGA92/S138A are met, unless the person to whom the right is conferred elects for that treatment not to apply. For rights conferred before 10 April 2003 the position was the other way round - an election had to be made for the right to be treated as a security. See CG58023.

The following guidance is in terms of TCGA92/S138A. But the same practical results generally apply where the computations involve ESC/D27. Guidance on the transition from ESC/D27 to TCGA92/S138A in 1996 is at CG58200+.