Entrepreneur relief

[Cmax]

Hi all- so I have been approached to be bought out. Waiting to meet a tax consultant but curious on the following:
- operating as a sole trade approx 6 years
-selling client list
- pmt for same will be over two years, last payment will be reduced if the full turnover amount do not change over and likewise- if more go, the increase will be received on last pmt.

can I still claim entrepreneur relief where full pmt is not received up front? Do I pay cgt on all at the start? I’m confident that the figure I have given will move over - if anything prob more.
Anything else I should be aware of??
Many thanks

 

[AAAContributor]

can I still claim entrepreneur relief where full pmt is not received up front?

In principle, Entrepreneur Relief is available where the terms of an asset disposal include an element of deferred consideration.

Do I pay cgt on all at the start?

The full amount of the consideration must be included in the CGT computation with the possibility of a revised CGT computation if there are irrecoverable proceeds or final proceeds are less than that factored into the original computation.

The CGT treatment can get more complex if it's determined based on the facts of your situation that the right to future proceeds is treated as a separate asset.

In this case, the value of the right to receive the future sum is estimated at the date of original disposal and is included in the original CGT computation as proceeds. This is then regarded as the base cost on the future "disposal" of the asset and the gain/loss is calculated by comparing this with the amount actually received. There could be a second CGT calculation (with regard to the future proceeds) and Entrepreneur Relief would not apply on the future proceeds as you are disposing of a right as opposed to an asset that qualifies for Entrepreneur Relief.

I know you say that the amount that you can receive down the line could be revised up or down. In the case of an upward revision, is there a cap on the proceeds receivable?