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Calculation of gain relief when business is sold partially

Resolved Question:

Calculation of gain for enterprise relief when business is sold partially on earn out
Submitted: 11 months ago.
Category: Tax
Expert:  bigduckontax replied 11 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be bale to help you with your question.

Could you please expand a tad on your question? Normally it is the net gain which would be exposed to Capital Gains Tax (CGT) on disposal.

Customer: replied 11 months ago.
I will be paid 50% on signing to deal 25% in 12 months and a further 25 % in 24 months subject to certain earnings targets being met. When do I incur the c g t liability as gain will be 250/- 125/- and 125/- +|_ and amount of last tranche is uncertain?
Expert:  bigduckontax replied 11 months ago.

As a general rule the gain is calculated and taxed on the whole transaction as at the first date of sale. Thus you pay CGT in advance of some receipts. In the event of a shortfall in the sales receipts you can apply to HMRC for a refund.

However, you can apply to HMRC for the gain to be treated in installments, but the period of such installments may not exceed eight years.

bigduckontax, Accountant
Category: Tax
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Expert:  bigduckontax replied 11 months ago.

Thank you for your excellent support.

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