The following Tax guidance note Produced in partnership with Charles Goddard of Rosetta Tax provides comprehensive and up to date legal information covering:
In many real estate sale and purchase transactions, the consideration for the sale will include an element of overage. Overage can be structured in a number of ways. Its direct tax treatment will depend on the way it is structured and the tax status of the recipient and payer.
This Practice Note considers the principal types of overage, and the direct tax treatment of the seller and purchaser.
The payment of overage will also have consequences for SDLT and VAT purposes, which may be sufficiently significant to drive the form of the transaction. These are outside the scope of this Practice Note. For the VAT consequences, see Practice Note: VAT treatment of overage and for the SDLT considerations, see Practice Note: SDLT chargeable consideration — overage payments.
In this Practice Note, references to income tax include corporation tax on income and CGT means both capital gains tax and corporation tax on chargeable gains.
Overage describes the position where a seller (typically, though not necessarily, of land) retains the right to receive from the purchaser an amount of additional consideration after the completion of the sale and payment of any initial consideration.
The right retained by the seller will typically consist of the right to receive an additional cash payment, though other forms of consideration (such as shares, or other assets) are
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