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Tax aspects of acquisitions, disposals and reorganisations

Whether you are a regular deal maker, or you are contemplating a once in a lifetime transaction, tax is an important aspect of an acquisition, a disposal or a reorganisation. Appropriate tax advice can make a marginal transaction a viable proposition or provide the icing on the cake in the case of a good deal. Conversely, a lack of tax input can result in a good deal being a costly failure.

Structuring
There are very significant tax differences in the tax treatment of an asset deal compared with a share deal. A purchaser will generally favour the former and a vendor the latter.

Substantial Shareholdings Exemption (SSE)
This is a very valuable relief potentially available on the disposal of subsidiaries. But, because it is so valuable, stringent conditions have to be satisfied.  Conversely, a vendor might prefer the SSE not to apply if a disposal would give rise to a capital loss.

Tax due diligence
If you are acquiring a business, it is important that you understand what lies behind the numbers, including any potential liabilities.  If you are selling a business, you may wish to provide potential purchasers with vendor due diligence.

Value added tax
It is important to understand the VAT implications of a transaction, particularly as it could give rise to a cost equal to 20% of the transaction value.  We can advise on the VAT treatment of transactions and the recovery of input VAT.

Tax warranties and indemnities
The solicitors will be responsible for drafting these. We can provide support by reviewing them, and advising on the related disclosure letter.

Tax efficient reorganisations
Tax issues need to be factored in to business reorganisations. You may wish to divide a business between two groups of shareholders or to separate ownership of trading and investment activities, for example, to maximise the capital gains and inheritance tax reliefs available in respect of the former.  This can be done tax efficiently using a number of tax relieving provisions.

Tax clearances
Transactions normally take advantage of tax relieving provisions or are subject to anti-avoidance provisions. If advance clearance from HMRC is available we will draft and submit the applications on your behalf.

Whatever the nature of the transaction you are contemplating, it is essential to obtain tax input at an early stage as it can influence the structure and terms of the deal. Our team has a wealth of experience advising on acquisitions, disposals and reorganisations. For more information, please contact Philip Parr, Sue Bill, Jacquelyn Kimber or your nearest Moore Stephens business tax adviser.

 

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