Buyouts—tax issues for the acquisition group
Buyouts—tax issues for the acquisition group

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Buyouts—tax issues for the acquisition group
  • Structure of a buyout
  • Dividends and distributions
  • Tax relief on borrowings
  • Corporation tax relief
  • Deductibility and VAT recovery of deal costs

This Practice Note summarises the main tax issues arising for the UK acquisition group in a private equity-backed buyout.

In particular the note:

  1. describes the tax treatment of dividends paid between group members

  2. summarises tax issues arising in respect of acquisition group borrowing

  3. explains the significance of corporation tax relief that may be available, and

  4. summarises the tax deductibility of deal costs and opportunities for VAT recovery for the acquisition group

For a more detailed explanation of the tax issues relevant to acquisition group borrowing, see Practice Note: Buyouts—tax issues on acquisition group borrowing and for a more detailed explanation of the tax treatment of buyout costs (including VAT recovery), see Practice Note: Buyouts—deductibility of deal costs and VAT recovery for the acquisition group.

This Practice Note does not consider tax issues arising where members of the acquisition group are not resident in the UK.

For a summary of the tax issues arising for the management team in a buyout, see Practice Notes: Management buyouts—summary of tax issues for management and Secondary buyouts—summary of tax issues for management.

Structure of a buyout

In the context of private equity, a buyout is a common form of acquisition which 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).