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Deferred Consideration & Earn-Outs

Tracey Wright Senior Associate in the corporate tax team at Osborne Clarke revisits the taxation of deferred consideration and earn-outs in light of Finance Bill changes
On a private company takeover an individual shareholder is often required to take deferred consideration — this may be because the Purchaser does not have sufficient cash to pay the full purchase price or it may be because Purchaser and Seller cannot agree on the correct valuation and part of the purchase price will depend on future profits.
Prior to 6 April 2008 such a shareholder usually wished the deferred consideration to be satisfied by the issue of a loan note to defer the tax charge. The Finance Bill 2008 changes to capital gains tax (CGT) affect the taxation of such consideration. So will we...

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