Q&As

What is the impact of Brexit on the drafting of tax covenants and warranties?

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Produced in partnership with Patrick Ford of Squire Patton Boggs
Published on LexisPSL on 14/09/2016

The following Tax Q&A produced in partnership with Patrick Ford of Squire Patton Boggs provides comprehensive and up to date legal information covering:

  • What is the impact of Brexit on the drafting of tax covenants and warranties?

What is the impact of Brexit on the drafting of tax covenants and warranties?

At the moment, none.

Brexit may eventually alter the way in which tax covenants and warranties are negotiated and drafted but, until we know more as to what exactly Brexit will entail, there is no effect on the current approach.

Even when the details of Brexit are known, the principles underlying the tax covenant should not change. For example, when considering the risk of a change in law, the accepted market practice that the buyer bears the risk of any changes in law after Completion that apply retrospectively and which cause or increase a pre-completion covenant liability shouldn’t be disturbed. It is unlikely that Brexit will result in any genuine retrospective changes in law. However, the sometimes pertinent debate as to whether a change of law is ‘announced’ may become more relevant as the implications of Brexit become clearer, particularly if/when the government has outlined any changes to the UK tax regime.

When looking at specific

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