Making your mind up

KEY POINTS

• The curse of Marren v Ingles
• Making use of loan notes to take advantage of CGT deferral under TCGA 1992 s 138A
• Marren v Ingles treatment can be beneficial
• The impact of entrepreneurs' relief

Over the past few years many owner managers have sold their companies with part of their sale consideration being subject to some form of earn-out arrangement.

Earn-outs are generally employed to reconcile the so-called 'price gap' that often exists between a vendor and purchaser.

The vendor has the ability to receive additional 'deferred' consideration depending on the post-acquisition performance of the target company.

However the purchaser only pays such further amounts (according to a formula) based on the level of profits in the target company delivered by the vendor typically over a two- or three-year period...