that the Sellers each have a holding of at least 5% in the voting share capital of the Buyer.
9.5 As Section 138A creates a deemed non-QCB this is now unlikely to be the route chosen for earn outs on smaller transactions: it will still be the choice in larger transactions in which the shareholders have already achieved gains of £1 million each from the ascertainable consideration. If this is not the case, Sellers will be likely to elect not to use Section 138A: the earn out right will therefore need to be valued at Completion under the Marren v Ingles approach; the Sellers will rely on Section 279A if they then make a loss on the realisation of the earn out right. As noted above, this section gives the ability to carry such losses back to set against earlier gains on the transaction.
10Tax Position of the Buyer
10.1 The tax position of the Buyer is relatively straightforward as the consideration that he pays will, together with the professional costs, represent the base cost of the shares in the Company. The possible receipt of payments under the warranties or the tax covenant brings various tax issues to bear and these are addressed in chapter 7.
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