This example illustrates the effect of an earn-out right being treated as a security by TCGA92/S138A if a taxpayer sells shares and the consideration received is an immediate payment of cash and the right to receive an unascertainable deferred amount of shares.

All events take place on or after 26 November 1996. Illustrative indexation factors have been provided for the purposes of this example only. Indexation allowance does not apply to Capital Gains Tax disposals from 2008-09.


In year 0 taxpayer acquires all the shares in T Ltd for £100,000.

In year 10 the taxpayer sells the shares in T Ltd at arm's length to P Ltd.

The consideration is

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