Transactions tax advisory

Tax is an essential issue at all stages of a transaction. Getting the tax team involved early leads to a smoother process, with less risk and increased legal protection. The S&W transactions tax team can assist with the following:

Modelling – tax can significantly affect the business valuation. The tax assumptions in a model may impact above-the-line numbers or the cash tax liability spanning at least five years.

We can review tax assumptions and historical financial information to ensure that the tax balances in the enterprise value are reasonable. We can also help individual shareholders model the tax profile of offers received and their tax position throughout the transaction as structuring becomes clearer, enabling them to plan their personal finances with greater certainty.

Purchaser due diligence – understanding the potential UK and global tax liabilities and assets in a business allows a purchaser to obtain price adjustments, get appropriate contractual protection and understand the business’s tax requirements from the first day 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 and 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.

Our team can help ensure a smooth business exit strategy, providing the right level of service depending on the size of the deal, access to information and timing.

• Undertaking a full purchaser due diligence process to review the historic tax position of a group covering all main taxes
• Undertaking 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

Structuring – how you structure your purchase or disposal can have significant tax consequences both on the deal itself and the post-sale stage of your business exit.

We can help:

• Preparing structuring step plans with appropriate tax analysis to allow all stakeholders and their advisers to understand the required structuring steps and transaction timings
• Assessing individual shareholders’ eligibility in advance for tax reliefs, such as business asset disposal relief (formerly entrepreneurs’ relief), investors’ relief, or any venture capital tax relief. The structuring of the sale process may determine the availability of these reliefs. This should be reviewed early so that any requirements can be built into the negotiations
• Advising on the individual and corporate tax implications of the structuring of consideration received on a sale and payment timings. Early advice is essential if the sale consideration takes the form of deferred payments, loan notes, equity or earn-outs
• Assisting 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. Their tax treatment on sale will need to be considered in detail, including the PAYE or NIC 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, and on implementing 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 help:

• Reviewing legal documentation drafted by the transaction lawyers and providing recommendations based on the due diligence findings and the structuring support provided
• Liaising with insurance providers, as required

Post-deal support – after the business sale or purchase is complete, numerous tax tasks will be 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 in line with business activities.

Our team supports owners and management throughout the sale process and beyond with coordinated and complementary services.

Our dedicated Transaction Services team assists with a full financial review of a business and associated support.