Readers' forum: Valuation conundrum

My client disposed of the entire share capital in her trading company on 30 April this year. All of the conditions for capital gains tax entrepreneurs’ relief (ER) were met. The consideration was £٢m up front with an earnout based on the annual profits of the following three years. There is no minimum or maximum amount of deferred consideration specified in the contract. All payments are to be made in cash and there is no loan note or share alternative.

My client understands that the initial disposal consideration will be the upfront cash plus the value of the right to receive further consideration. That will qualify for ER. When the deferred consideration is received that will be a separate disposal for capital gains tax purposes (with a base cost of the value brought into charge up-front) on which ER will not be available.

My client has suggested that she should put a very high value on the...