Our Transactions Tax team covers all relevant taxes and is experienced in all parts of mergers and acquisitions process on both sides of a transaction.
How we can help
Tax is important in all stages of a transaction and getting the tax team involved early leads to a smoother run process, with less risk and increased legal protection. The Evelyn Partners Transactions Tax team can assist with the following:
Modelling – tax can significantly affect the valuation of a business. In a model the tax assumptions may be hitting the above-the-line numbers or the cash tax liability spanning at least five years.
- Can review tax assumptions and historical financial information to ensure that the tax balances in the enterprise value are reasonable
- Help individual shareholders to model the tax profile of offers received and their tax position throughout the transaction as structuring becomes clearer. This enables them to plan their future personal finances with greater certainty
Purchaser due diligence – understanding what potential UK and global tax liabilities and assets exist in a business allows a purchaser to obtain price adjustments, to get appropriate contractual protection and to understand the tax requirements of the business from day one of ownership.
Vendor due diligence - a company and its owners should prepare for the due diligence process by gathering the right tax information and planning/correcting any tax issues that may form part of the deal negotiation. Vendor due diligence is essential to get your business ready to sell and ensure a successful financial exit.
As part of your business exit strategy, our team can:
- Undertake a full purchaser due diligence process to review the historic tax position of a group covering all main taxes
- Undertake a light-touch purchaser due diligence process to review and interview management and provide a red-flag report
- Provide vendor due diligence assistance, reviewing your tax position and processes and feeding our findings back to you
We would discuss with you what level of service is appropriate given the size of the deal, access to information and timing.
Structuring – how you structure your purchase or disposal can have significant consequences for tax both on the deal itself and the post-sale stage of your business exit.
Our team can:
- Prepare structuring step plans with appropriate tax analysis, to allow all stakeholders and their advisors to understand the required structuring steps and timings of the transaction
- Assess in advance an individual shareholder’s eligibility for any tax reliefs, such as business asset disposal relief (formerly entrepreneurs’ relief), investors’ relief, or any of the venture capital tax reliefs. The availability of these reliefs may be determined by the structuring of the sale process. This should be reviewed at an early stage so that any requirements can be built into the negotiations early on
- Consider the structuring of consideration received on a sale for individual and corporate tax purposes and timings of any payments. Advice should be sought as early as possible if the sale consideration takes the form of deferred payments, loan notes, equity or earn-outs
- Assist with maximising tax relief on deal costs from a personal, corporate tax and VAT perspective
Management incentive plans – share schemes such as ‘Enterprise Management Incentive’ options or ‘non-tax advantaged’ options are often exit-driven. The tax treatment of share schemes on sale will need to be considered in detail, including the PAYE or NICs obligations arising to the target company. Implementing a new incentive plan pre-transaction may also assist in maximising sale value.
Our team can advise:
- On the tax treatment of any employee shares or share options on an exit event
- On the implementation of new management incentives, either pre or post-transaction
Legal protection – the results of the due diligence and the required structuring steps need to be carefully incorporated into the Sale and Purchase Agreement and associated documents.
Our team can:
- Review legal documentation drafted by the transaction lawyers and will provide recommendations based on the due diligence findings and structuring support provided
- The team liaises with insurance providers as required
Post-deal support – once the business sale or purchase is complete there will be numerous tax tasks outstanding. These can include deal-specific tasks such as filing tax elections, actions from diligence work, engaging with HMRC on a particular issue, or general tasks that need to be undertaken in line with business activities.
Our team supports owners and management throughout the sale process and beyond. Our ability to bring together personal tax advice, corporate tax advice financial planning and investment management services allows us to deliver coordinated and complementary services.
Our dedicated Transaction Services team assists with a full financial review of a business and associated support. Please see the following link for more information.
Frequently asked questions about transactions advisory
I have a small UK business that I want to sell. Do I need to have a specialist tax transactions team?
It is important to maximise value on any transaction. Having a specialist team working with you allows you to collate all the information that is usually requested in a diligence process and prepare appropriate responses to prevent unnecessary discussions and potential price reductions.
If any share options are being exercised pre-transaction, or if any deferred consideration is likely to be paid, it will be important to ensure that the transaction steps are executed in the right order.
You should obtain tax advice in relation to your personal tax position to ensure that the structure of the sale does not lead to preventable tax issues.
What VAT advice, other than due diligence, can you provide on a transaction?
Our transactions tax team advise on the best strategy for recovery of VAT on transaction costs and future operating costs, and assist with compliance requirements that may arise on the transaction, such as VAT registration, VAT grouping, options to tax, special partial exemption methods and more.
Our transactions tax team also input into legal documentation based on knowledge obtained during the due diligence process.
I am raising finance for one UK company; surely I don’t need specialist tax advice as I’m not selling anything?
A valuation will have been undertaken in order to work out how much financing can be supported by the business. This valuation is likely to have some tax assumptions contained within the calculation and these should be reviewed carefully.
A due diligence analysis of your business is likely to be undertaken and it is recommended that you prepare yourself for any potential questions that may arise.
I have a vendor due diligence report provided by the vendors. Do I need to engage a tax transactions team as the tax diligence has been done already?
In this situation we usually recommend a high-level review of the target’s business and vendor due diligence report. This would allow you to test the tax findings in the report and come to your own conclusions on any tax issues in target. This should put you in the best possible negotiation position.