Contingent, uncertain or unascertained consideration
Section 18 – Contingent consideration
55.Section 18 provides that where the whole or part of the chargeable consideration for a transaction is contingent, the amount of consideration should be calculated on the assumption that the amount relating to the contingency will be payable, whether or not the occurrence of the contingency means that the amount will be payable or cease to be payable. So where a contingency affects the eventual amount of consideration, buyers must calculate the consideration on the basis that the amount relating to the contingency will be payable. “Contingent” is defined in subsection (3).
Section 19 – Uncertain or unascertained consideration
56.Section 19 provides that where the whole or part of the chargeable consideration for a transaction is uncertain or unascertained, the amount of consideration should be calculated on the basis of a reasonable estimate of the outcome. So where the consideration is uncertain or has not yet been ascertained – for example, where it is based on profits in accounts which have not yet been drawn up – buyers must make a reasonable estimate of the final consideration as at the effective date of the transaction.
Section 20 – Contingent, uncertain or unascertained consideration: further provision
57.Section 20 clarifies that sections 18 and 19 on contingent, uncertain or unascertained consideration are to be read with sections:
31 (return where contingency ceases or consideration ascertained),
32 (contingency ceases or consideration ascertained: less tax payable), and
41 (application to defer payment in case of contingent or uncertain consideration).
