Section 161 | Earn-out rights to be treated as securities unless contrary election

(1)Section 138A of the Taxation of Chargeable Gains Act 1992 (c. 12) (use of earn-out rights for exchange of securities) is amended as follows.

(2)In subsection (2) (seller’s right to elect for earn-out right to be treated as security of new company)—

(a)at the end of paragraph (a) insert “ and ”; and

(b)omit paragraph (c) (the seller’s right of election) and the word “and” immediately preceding it.

(3)After subsection (2) insert—

(2A)Subsection (2) above does not have effect if the seller elects under this section for the earn-out right not to be treated as a security of the new company.

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(4)In subsection (4) (election for corresponding treatment where old right extinguished in consideration of new right)—

(a)at the end of paragraph (c) insert “ and ”;

(b)omit paragraph (e) (right of election of person on whom the new right is conferred) and the word “and” immediately preceding it; and

(c)in the closing words, for “that person” substitute “ the person on whom the new right is conferred ”.

(5)After subsection (4) insert—

(4A)Subsection (4) above does not have effect if the person on whom the new right is conferred elects under this section for it not to be treated as a security of the new company.

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(6)The amendments made by this section have effect in relation to rights conferred on or after 10th April 2003.