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Posted Mon, 13 Feb 2023 17:36:50 GMT by wilson1505
Hello I would like to know how to calculate Business Asset Disposal Relief in Self Assessment. I had sold 14% shares from my Limited Company in 31 July 2022. But I received prepaid payment for the 14% shares which was £50K on 1 Febraury 2022. In 31 July 2022, the 14% shares should worth approximately £60K to £65K (We are still working on the actual share price as we haven't work out the annual profit from 1 Aug 2021 to 31 Jul 2022 yet). I will receive the payment from difference between actual share price and prepaid share price once I work out the annual profit. I had read through the HMRC guidance, it says I can claim the business asset disposal relief. In this case, can I claim the relief for the £50K prepaid share value in 2021/22 self assessment tax return? And claim the rest relief: about £10K to £15K in 2022/23 self assessment tax return? (£60K total share price -£50K prepaid share price=£10K or £65K total share price -£50K prepaid share price =£15K) Thank you in advance!
Posted Wed, 15 Feb 2023 14:37:41 GMT by HMRC Admin 32

You need to look at CG14260 as this covers the rules determining the date of disposal. Also need to look at CG14850P regarding deferred consideration, in particular CG14881 for the meaning of ascertainable, and CG14940 & CG14950 for guidance on unascertainable consideration. If the date of disposal of the shares was 31 July 2022, and the deferred consideration is ascertainable, the full amount of the consideration for the disposal should be declared on the 2021 to 2022 Self Assessment return.

There is no tax consequence when a future amount of deferred ascertainable consideration is received. If the deferred ascertainable consideration becomes irrecoverable they could make a claim for relief under S48 TCGA 1992 – CG14933. If the date of disposal of the shares was 31 July 2022, and the deferred consideration is unascertainable, the value of the right to the unascertainable amount must be added to any ascertainable consideration at the date of disposal to calculate the chargeable gain. The right to future payments of unascertainable consideration is a separate chargeable asset itself from which a capital sum will be derived when the deferred payment is actually received.

A capital gain or loss could arise when the deferred unascertainable consideration is actually received. If the disposal of the right to unascertainable consideration results in a capital loss they could claim relief under S279A TCGA 1992 – CG15121 / CG15122. Business Asset Disposal Relief can be claimed for either ascertainable or unascertainable deferred consideration if the relevant conditions are met HS275 & CG64050.

Thank you.

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