CGT changes cause deferred payment confusion

Date: 29th January 2008

More guidance is needed on how to treat purchases made with loan notes under the new capital gains tax (CGT) system, it has been claimed.

Although HM Revenue & Customs has issued guidelines on claiming the new Entrepreneurs' Relief, they make no mention of how the changes to tax on business assets will affect deferred payments, Accountancy Age reports.

Loan notes are often used when businesses are bought and sold, with the purchaser agreeing to make payments to the holder at a specified date in the future.

"HMRC will not confirm if deferred gains attached to loan notes will qualify for the new Entrepreneurs' Relief," said Peter Harrup, tax partner at PKF.

"We cannot advise loan note holders whether they should elect to crystallise their taper relief or wait and claim for the new Entrepreneurs' Relief instead," he added.

The Treasury has stated that the changes to CGT will help to "deliver a more sustainable, simplified and internationally competitive system" for taxation in the UK.

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