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Where Taxpayers and Advisers Meet

CGT on company sale consideration

johhny
Posts:1
Joined:Sat Sep 18, 2021 12:27 pm
CGT on company sale consideration

Postby johhny » Sat Sep 18, 2021 12:54 pm

My company was recently sold and the consideration for shares I owned was split into two payments. I received an initial consideration payment on closure with a further ("earnout") consideration due in 12 months if the company meets the required performance targets. How is UK CGT with entrepreneurs relief handled when the company sale consideration is split in this way? The initial payment is a known fixed value and the second payment is a sliding scale based on performance so the value of the second payment can only be estimated at the moment.

When completing the tax return should I enter the initial known payment and the estimated future payment in this years tax return? Or should I only enter the initial known payment this year and enter the final payment in next years tax return once the payment is received?

If I only enter the initial payment in this years tax return what cost of shares should I use for capital gains calculations? Should I split the cost of shares in the same ratio as the initial payment and the estimated final payment?

Thanks

pawncob
Posts:4750
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT on company sale consideration

Postby pawncob » Sun Sep 19, 2021 7:34 pm

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg58000p
With a pinch of salt take what I say, but don't exceed your RDA


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