Disposal proceeds or interest?

Question

A client company is dealing with a sale of shares and it is expected that the gain on the disposal will qualify for the substantial shareholding exemption. Completion of the contract has been delayed for several months and a considerable amount of ‘interest’ has effectively been added to the basic consideration for the sale of the shares. My client wonders whether this ‘interest’ will be subject to corporation tax under the loan relationship rules or whether it will form part of the consideration for the sale of the shares.

Answer

For both capital gains tax and corporation tax purposes a gain is computed by reference to the excess of the disposal proceeds over the acquisition costs for an asset. In a case where part of the proceeds are described as ‘interest’ the question arises as to how this part of the proceeds...