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HMRC internal manual

Capital Gains Manual

Deferred consideration: shares and securities: what to consider

The computations in each case will depend upon the precise combination of immediate and deferred consideration. You will usually need to consider three questions.

  • WHAT IS THE IMMEDIATE CHARGE TO CAPITAL GAINS TAX? As well as cash the chargeable disposal proceeds may include the value of the right to receive later payments. You will need to apportion the acquisition cost of the original shares between the different elements of the consideration.
  • WHAT IS THE VALUE OF THE RIGHT TO RECEIVE THE LATER PAYMENTS? You will need this either because there is an immediate charge to tax on the value of the right or to apportion the cost of the original shares as referred to in the previous bullet.
  • WHAT HAPPENS WHEN THE SHARES OR DEBENTURES ARE ISSUED? There may be a further liability to Capital Gains Tax (or a loss) if the value of the right when it was conferred gave an immediate charge to Capital Gains Tax. Whether it did or not you will need to establish at what cost any shares or debentures issued in satisfaction of the right are acquired, and how any shares fit into any existing share pool.