Mergers, acquisitions and disposals – other considerations

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Mergers, acquisitions and disposals – other considerations
  • Overseas entity recharges deal costs to UK entity
  • Due diligence and general expenses
  • Intermediary services

This guidance note provides an overview of the other issues that need to be considered as part of a business restructuring project. This note should be read in conjunction with the Mergers, acquisitions and disposals guidance note.

Overseas entity recharges deal costs to UK entity

It is common for overseas entities to be involved in the share acquisitions of UK companies. Also it is possible that shares in companies in different countries, including the UK, are being acquired by a non-EU entity.

If the group has a non-EU headquarters that is acquiring the shares in a UK company, then this may be funded by the headquarters of the corporate group.

If the overseas headquarters has entered into agreements with professional advisers, and has incurred the cost of the their services, the headquarters may decide it is appropriate to recharge all or part of these costs to the UK holding company (hereafter 'Holdco'). The issue is whether the UK Holdco will be required to account for the UK reverse charge on the acquisition costs that have been recharged by the non-EU headquarters, as the UK Holdco is unlikely to be in a position to recover this VAT. However, if the services are treated as a supply for UK VAT purposes and Holdco is already registered for UK VAT then the company may be required to account for VAT. Also if Holdco is not currently VAT registered then the value of the recharged costs may cause it to exceed the UK VAT registration threshold. Please see the Overview – registering for VAT guidance note for more information.

The business will need to ascertain whether the VAT accounted for using the reverse charge can be recovered, however, based on the information provided in the Mergers, acquisitions and disposals guidance note it is unlikely to be recoverable. For a major acquisition the

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