This example illustrates the effect of an earn-out right being treated as a security by TCGA92/S138A if a customer sells shares and receives an immediate issue of shares and the right to receive an unascertainable deferred amount of shares.

NOTE From 6 April 2008 only companies and other concerns within the charge to Corporation Tax may be able to claim indexation allowance, see CG17207.


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

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

The consideration is

80,000 shares in P Ltd at market value of £2.25 each (total £180,000), and

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