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Tax Due Diligence

Know the tax risks in a business before you buy it, invest in it or sell it.

At a glance

A review of a company's tax affairs ahead of an acquisition, investment or sale, so that tax risks are identified early and can be reflected in the price and the deal documents.

Who this is for

  • •Buyers acquiring a UK company or business
  • •Investors taking a stake in a UK company
  • •Owners preparing a business for sale
  • •Lenders and their advisers needing a view on tax risk

What is involved

We agree the scope and timetable with you, review the target's tax records and the data room, raise questions, and report our findings in a format that suits the deal. We then help your lawyers reflect the findings in the deal documents. Fees are agreed before work starts.

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For buyers and investors

The review is scoped to the deal, but it typically covers:

  • Corporation tax returns, computations and open enquiry windows
  • PAYE, National Insurance and how workers and contractors are treated
  • VAT registration, returns and partial exemption
  • Share schemes, including EMI options, and employment-related securities
  • R&D and other relief claims
  • Transactions with connected parties and overseas group companies
  • Past HMRC enquiries, disclosures and correspondence

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For sellers

Find the issues before the buyer does.

Tax issues raised by a buyer late in a sale can lead to price reductions, retentions or a stronger indemnity than you would like to give. Reviewing the position first means you can deal with anything that needs fixing on your own terms.

  • A tax health check before the business goes to market
  • Fixing issues, or making disclosures to HMRC, before a buyer finds them
  • Preparing a clear tax data room
  • Answering the buyer's tax questions during the deal

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How it works

  • Agree the scope, materiality and timetable with you and your other advisers
  • Review the target's tax records and the documents in the data room
  • Raise questions with the target and its advisers
  • Report the findings, with the likely size of each exposure where it can be estimated
  • Help your lawyers reflect the findings in the warranties, indemnities, tax covenant and price

Rob Osborne CTA was an HMRC Senior Tax Inspector and later worked at EY, where he was involved in a number of projects involving large and complex situations. We look at a company's tax records the way HMRC would, and focus on the areas where HMRC is most likely to raise questions.

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FAQ

Frequently asked questions

What is tax due diligence?
It is a review of a company's tax affairs before you buy it, invest in it or lend to it. The aim is to find tax that may be owed for past periods, risks in how the business is run, and anything that could affect the price or the terms of the deal.
Why does it matter when buying shares in a company?
When you buy the shares, the company keeps its tax history. Any tax it underpaid before completion remains its liability after you own it. Due diligence identifies those risks so they can be dealt with in the price or the sale agreement.
How long does it take?
It depends on the size of the business and how quickly information is provided. We agree the scope and timetable at the outset so the work fits the deal timetable.
Do you work with our lawyers and other advisers?
Yes. Our findings feed into the sale and purchase agreement, so we work closely with your lawyers on the tax warranties, indemnities and tax covenant, and with any financial due diligence provider.
Can you help if we are selling?
Yes. A tax review before a sale lets you deal with issues on your own terms, rather than having them raised by the buyer late in the process when they can affect the price.
Will we get a full report or a short summary?
Whichever suits the deal. Smaller transactions often need a short report highlighting the key risks; larger ones may need a fuller report. We agree the format before work starts.

Buying, investing or selling?

Tell us about the deal and the timetable, and we will propose a scope and fee.

Message us on WhatsApp
or send a short enquiry

We reply to every enquiry within 24 hours, in confidence. Prefer email? hello@rmhoconsulting.com

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