There are three main tax considerations when a UK company makes an acquisition outside the UK. These are:
- •
structure, ie whether to establish a new subsidiary to make the acquisition
- •
finance, ie whether to fund the new subsidiary with debt or equity
- •
whether to acquire assets or shares in the target business
The same considerations will apply when a foreign company makes an acquisition of a UK business.
For more in-depth guidance, see Tolley’s International Tax Planning Part B2 ‘Cross-border acquisitions’.
Structure
There are a number of different structures which a company can use to acquire a target business in another country. These structures are similar to those which are used when setting up a new business in another country.
See the Setting up overseas ― companies and Setting up overseas ― branch or subsidiary guidance notes.
Subsidiary
This structure will exist if:
- •
the acquiring company buys shares in the target company
- •
the acquiring company establishes a new subsidiary to acquire assets of the target business
Diagram 1 ― subsidiary ― share acquisition:
If
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