My client has received £65,000 in the 2010/11 tax year in respect of the sale of his EMI shares in the unquoted company which he is a director of, as a result of the sale of this company. There is an earnout of £60,000 which is contingent on the new company which he now works for, meeting certain sales targets in the 2011/12 tax year. Taking the initial cash received of £65,000 plus the earnout of £60,000 into account, this results in CGT payable of £29,000 in 2010/11. Am I correct in thinking that if the company fails to meet the target, and my client then does not therefore receive the earnout of £60,000, he will have paid CGT in 2010/11 (£16,800) on something which he has not received, and can only have a carried forward capital loss in 2011/12 for any future disposals? If this is correct, then it appears to be grossly unfair, as this is a one-off event for my client who is an employee of the company and not a speculative individual.
I would be grateful to hear of any thoughts from others on this,
Thanks
Amanda Lambert
Replies (6)
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Take into account an acquisition
The disposal of an asset for future contingent consideration is a disposal of an asset and the acquisition of a new asset (the right to future consideration) - Marren v Ingles (1980)
http://www.hmrc.gov.uk/MANUALS/cgmanual/cg12070.htm
s48A TCGA92
I believe the claim may be under s48A TCGA92 as the amount of the deferred consideration is ascertainable, as opposed to s279A TCGA92 which relates to unascertainable consideration