Delay tax payments when consideration paid in instalments
19th June 2026
Posted in Articles by Andrew Marr
The issue
When an asset is disposed of capital gains tax (CGT) is usually payable in full on 31 January following the year in which the gain was made. However, when the consideration is received in instalments over an extended period, TCGA 1992 section 280 can provide scope for tax to be paid later than the normal due date, without any interest charges.
When might the rules apply?
These rules may be relevant when:
- Instalments begin no earlier than the date on which the asset is disposed of.
- They extend over a period exceeding 18 months.
- They continue beyond the 31 January date on which the tax would otherwise be due and payable.
The relief is only available when proceeds are genuinely payable over a set time period and so they would not apply to late payments.
Agreeing a payment plan
The taxpayer needs to agree a payment plan with HMRC, but this will generally work by them sending a letter explaining why the legislation applies and suggesting a payment plan to be agreed along the lines of the example below.
Example
John sells his shares for £5 million on 1 July 2026.
The consideration is payable as follows:
- £1 million on completion;
- £2 million after two years; and
- £2 million after four years.
After deduction of costs, the disposal gives rise to a CGT liability of £1 million.
Because part of the consideration is payable more than 18 months after the disposal date, s.280 may apply. Rather than paying the entire £1 million CGT liability upfront, the seller may elect for the tax to be paid proportionately as the deferred instalments become due. The deal which would typically be agreed with HMRC would involve using 50% of proceeds to pay any tax, with the remainder being deferred. Therefore, in the above example, £500,000 would be due on the normal payment date of 31 January 2028 and then the remaining £500,000 would be due on 1 July 2026 when the second instalment is received.
Interest
There are a lot of misunderstandings around whether HMRC applies interest to these arrangements by reference to the normal 31 January payment date. These misunderstandings can arise from section 281 TCGA 1992 which is a separate piece of legislation that applies to gifts and where interest does apply.
Forbes Dawson view
In our experience, this opportunity is often overlooked with taxpayers paying all their tax on 31 January. Although there may often be attractions in structuring deferred considerations as loan notes – so as to defer the tax altogether – this will not always be viable. Indeed, the taxpayer may not like the idea of being hostage to unknown future increases to capital gains tax rates.
The instalment option should always at least be explored when payments are set to extend beyond 12 months at the outset. It may be particularly relevant to private equity deals where significant portions of the consideration can be payable over several years.
