Tax structuring for Seller Notes in the UK

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by a searcher from Queen's University
in London, UK

1yr ago

Tax structuring for Seller Notes in the UK

Wondering if anybody can share insights on the tax implications of seller financing in the UK. Specifically want to understand if capital gains taxes on the full amount payable in the year of the transaction, or if they can be deferred until repayment? Any other implications or considerations would be helpful to know as well.

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reply by a searcher 1yr ago
from London Business School in Sevenoaks, UK

Seller needs to go get tax advice. Assuming target is in a limited company, and deal structure is a share purchase, there’s no formal rollover relief any more but you can achieve a rollover of the gain under U.K. Qualifying Corporate Bond / Non-Qualifying Corporate Bond rules. It sounds complicated but it’s absolutely a standard structure in mid-market U.K. deals and any decent mid-size accounting firm would be able to guide Seller through it.

reply by a professional 1yr ago
from University of Nottingham in London, UK

CGT is usually payable on all the certain day 1 and fixed deferred consideration at the point of completion (so taxed up front). The situation is a bit more complex with earn outs where the amount to be received is uncertain. In these cases you would need to get the market value of the earn outs element and pay the CGT on that (with potential future gains/losses down the line depending on how much of the earn out is actually received)