Deferral and disposal

26 June 2012

Issue: 4359 / Categories: Forum & Feedback

Advice is required on the capital gains tax implications when assets are sold in tranches over a period of time. In what circumstances is an annual exemption given against each disposal and when is a disposal treated as being made at the time of the original contract regardless of the transfer of the asset?

I would be very grateful if anyone could give me a heads-up on the rules relating to deferred consideration.

My understanding was that if someone were to sell their shares in their company to a third party over a period of several years they would only receive one capital gains tax annual exemption and the contract would be deemed to take place at the time of the original contract.

However if other factors come into play – for example if the price to be paid for the future tranches depends on future performance or values – then each transfer would be treated as a separate disposal.

TCGA 1992 s 28 seems to set out these basic rules but I then noted that the commentary in Simon’s Taxes states:

‘For capital gains tax to apply there also needs to be a transfer of beneficial interest...

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