A takeover may occasionally be structured to involve an element of deferred consideration. This is much more usual in the context of sales of private companies with individual shareholders. However, similar considerations can exceptionally arise on a takeover of a public company. Deferred consideration raises chargeable gains tax issues for the shareholders and stamp duty issues for the purchaser.
Deferred consideration—chargeable gains implications
Where the amount of the consideration is ascertainable at the time of the transaction then the whole of the deferred consideration is brought into account upfront1. A common example of ascertainable consideration is where the purchase price is adjusted by reference to completion accounts which would only be finalised post-completion.
If the deferred consideration is unascertainable at the time of completion because it relates to future matters it will be taxed either as:
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