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HMRC internal manual

Capital Gains Manual

Deferred consideration: shares and securities: no deferred consideration

If the criteria (eg profit targets) for an earn-out payment are not met the vendor might not receive any deferred consideration. They will make an allowable loss on the disposal of the `right’ to receive deferred consideration - the `notional security’ for TCGA92/S138A, see the example in CG58101. A loss arising in a later year may not be carried back to set against gains of an earlier year (except on death, CG30430+).

FA03/S162 introduced TCGA92/S279A to 279D that allow losses on disposals of rights to receive deferred unascertainable consideration to be treated as if they arose in a year before the disposal occurred in certain circumstance, see CG15080+. But TCGA92/S279B (6) prevents those provisions from applying to earn-out rights that are assumed to be securities by TCGA92/S138A.