The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
There are many tax related matters to consider when one company purchases the shares of another. This guidance note is written from the perspective of the acquiring company (or group of companies). Some of the relevant considerations are set out below, split between pre and post completion matters for ease of reference.
It should be noted that distressed company purchases give rise to a range of additional issues, which are not covered in this note. For further commentary on these matters, see ‘Practice guide: Distressed company purchases’ by Eloise Walker and Mark Ingram in Tax Journal, Issue 1140, 21 (28 September 2012) (subscription sensitive).
The directors of the acquiring company will work with many different advisers throughout the transaction to acquire a company. Depending upon the nature of the transaction this is likely to include a team of lawyers, corporate financiers, tax advisers, valuations specialists, etc. The key driver for each of these parties at this stage of the transaction is to agree the detailed terms of the share purchase agreement (SPA) to the satisfaction of their respective clients, including the price payable for the shares and / or assets being acquired.
A due diligence exercise is usually carried out prior to the acquisition of the relevant shares. As part of this process detailed checks will be made concerning the legal, commercial, financial and tax history of the vendor company (or group). There are many reasons why a due diligence process is carried out, but from a tax perspective the key reasons are to determine:
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