CG58030 | Deferred consideration: shares/securities: rights partially qualify

TCGA92/S138A

TCGA92/S138A cannot apply if there are any circumstances in which a right to unascertainable deferred consideration could be satisfied in a form other than shares or debentures - section 138A(1)(d).

However, if part of the right can only be satisfied by the issue of shares or debentures that part can be treated separately for the purposes of the legislation.

An example would be where the sale agreement provided for an immediate cash payment of £500,000 plus two further payments, dependent on the profits of the next two accounting periods. These payments to be made half in cash and half in shares of the purchasing company. Section 138A could apply to that half which would be satisfied in shares. See CG58070 for an example showing the computations involved.