Buyouts—deductibility of deal costs and VAT recovery for the acquisition group
Produced in partnership with Chris Mortimer and Charishma Juddoo of Macfarlanes LLP
Buyouts—deductibility of deal costs and VAT recovery for the acquisition group

The following Tax guidance note Produced in partnership with Chris Mortimer and Charishma Juddoo of Macfarlanes LLP provides comprehensive and up to date legal information covering:

  • Buyouts—deductibility of deal costs and VAT recovery for the acquisition group
  • Structure of a buyout
  • Deductibility of costs incurred by the acquisition group in a buyout
  • Recovery of input VAT on deal costs

This Practice Note examines the following issues that arise in the context of a private equity backed buyout:

  1. the circumstances in which costs incurred by the UK acquisition group can be relieved against corporation tax, and

  2. the extent to which VAT incurred by the UK acquisition group prior to the buyout may be recoverable

For a general summary of key UK tax issues relevant to the acquisition group, see Practice Note: Buyouts—tax issues for the acquisition group and for an explanation of the tax issues relevant to acquisition group borrowing, see Practice Note: Buyouts—tax issues on acquisition group borrowing.

For general information about VAT recovery on corporate transactions, including VAT implications arising on business sales and corporate restructurings, see Practice Note: VAT recovery on corporate transactions.

This Practice Note assumes that all of the companies that make up the acquisition group are tax resident in the UK and that the acquisition is structured as a share sale. For further information on share sales and asset sales, see Practice Note: Share sale or asset sale—tax considerations.

Structure of a buyout

In the context of private equity, a buyout is a common form of acquisition that is backed by a private equity firm. A buyout can take many forms with two of the most common being management buyouts (MBOs) and secondary buyouts (SBOs). Both