Due diligence

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Due diligence
  • The due diligence project

A tax practitioner is most likely to become involved in due diligence in reviewing the target’s tax position on behalf of the purchaser.

The aim is to provide a report to management, as part of a wider financial and possibly commercial due diligence exercise, highlighting key areas of tax risk and suggesting what actions could be taken by management.

The due diligence report usually covers:

  • analysis of financial position
  • analysis of forecast results
  • details of customer base, value and terms of key contracts
  • details of the management team
  • review of costs ie staff, premises
  • review of tax position
  • asset review, ie identification of intellectual property and details of any protection eg patents, registered designs etc
  • purchasing and supply chain information
  • suitability of operating and IT systems

Due diligence is usually carried out by accountants, who may be part of a specialist corporate finance 'transaction support' team. The work will involve close liaison with other professional advisers eg lawyers, etc involved in drafting the sale and purchase agreement and other documentation.

Depending on the type of business carried on by the target, it may be necessary for the purchasing company to engage with a spe

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