Transactions advisory

When undertaking any significant business transaction, whether issuing finance, purchasing another business or selling a company, tax is an important part.

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 Smith & Williamson 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.

Our team

• 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.

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 going forwards.

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 a transaction 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.

https://smithandwilliamson.com/en/services/corporate-finance-and-transactions/