Possible types of consideration for share purchases

The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:

1. •

   new shares in the purchasing company in exchange for shares in the target company (a ‘share for share exchange’)

2. •

   cash

3. •

   loan notes issued by the purchasing company

4. •

   a mixture of the above

This guidance note covers the tax implications of consideration in the form of shares or a mixture of shares and cash. For details on the tax implications of consideration in the form of loan notes, see the Loan notes and Qualifying Corporate Bonds (QCBs) and non QCBs guidance note.

The timing of the consideration also needs to be considered. Consideration may be paid straight away or it may be deferred. Deferred consideration may be fixed or the amount may be variable. For more