These valuations arise when a company is sold and payment of
part of the purchase price is deferred. Usually the deferred
consideration is payable in tranches and is calculated by reference
to profits (typically) up to 3 years following the original sale
agreement. In such cases payment of each tranche constitutes a part
disposal of the right to deferred consideration and the normal part
disposal rules apply.
SAV is asked to agree not only the value of the deferred
consideration on the original sale (initial right) but also the
value of the remaining rights to deferred consideration immediately
after the payment of each tranche (residual right).
Where a series of payments is received this will form a
series of part-disposals. The Inspector therefore needs to know the
value of the remaining right at each date of payment to calculate
the CGT payable. The Inspector’s instructions are contained
in the CG Manual at CG14850 - 15090 and CG58000 - 58206.
When risk assessing this type of case you should bear in
mind that the right toreceive unascertainable deferred consideration is not a
business asset for thepurpose of taper relief. Any gains accruing on the
‘disposal’ of the right are noteligible for taper relief.
| Additional Guidance: SVM150000 |
