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  • Mergers and Acquisitions VAT

    We provide specialist M&A VAT support, from due diligence services, transaction support and VAT structuring advice to minimise the impact of VAT on M&A transactions, both buy-side and sell-side.

    VAT Due Diligence

    We have decades of experience providing support to investors on potential acquisitions, providing a focused, risk-based approach to the due diligence process, giving honest, practical advice to help clients to assess and manage potential post-deal exposures. We also provide vendor due diligence/health checks ahead of potential disposals.

    VAT Structuring

    We also advise and assist clients structure transactions in a VAT efficient way, including advice and assistance with VAT registration/VAT grouping and intra-group service agreements where appropriate.

    VAT recovery on deal fees

    HMRC have for a long time sought to minimise VAT recovery on M&A deal fees. We provide specialist advice to help clients overcome HMRC challenges through helping clients ensure that contractual arrangements support VAT recovery wherever possible and minimising VAT costs on deal fees (e.g. VAT exemption often applies to corporate finance fees).

    VAT Advice at
    ETC Tax

    The sale of business assets is typically subject to VAT, but if the trade and asset sale effectively constitutes the sale of a business, it may be possible to treat the sale as a Transfer of a Going Concern (‘TOGC’) with the sale being treated as outside the scope of VAT.

    There are a number of conditions that need to be met, not least that the assets purchased must be sufficient to enable the buyer to operate an independent business, and that the business to be operated must be the same type of business that the seller used the assets for.

    Further conditions also apply if a property interest is sold with the business (as it often is), so it is also important to ensure that these conditions are met.  If they are not, this may lead to an irrecoverable VAT cost for the seller, or if VAT is payable in the sale of the property, may lead to an irrecoverable VAT cost for the buyer or an unnecessary VAT cashflow issue at best.

    Also, if VAT is payable on the sale of a property, additional SDLT may become payable, as this is typically payable on the VAT inclusive property valuation.  Yes, tax on tax!

    If the shares in the company that operates a business are sold rather than the trade and assets of the business, the share sale will be VAT exempt.    Although this is good news to the extent that there is no VAT payable on the sale proceeds, this is likely to restrict the recovery of VAT on deal costs incurred by the seller and also potentially by the buyer.

    Although it might not be possible for VAT costs relating to share sales to be recovered, it may be possible to minimise the value of irrecoverable VAT incurred on costs by ensuring that deal advisers, apply VAT exemptions where available.  For example, intermediary services relating to the sale of shares or the raising of finance (services typically provided by Corporate Finance advisers) may be eligible for VAT exemption.

    HMRC are still keen on challenging the recovery of VAT on buy-side costs but because of some helpful VAT rulings handed down by the courts in recent years, they have been forced to concede that these are recoverable in certain circumstances, and have revised their policy to reflect this.

    However, VAT recovery is still only possible with the appropriate structures in place, so it is important to ensure that the necessary steps are put in place (as early in the deal process as possible) to maximise VAT recovery.

    Our VAT specialists are particularly experienced in M&A VAT matters and can advise on the best ways to ensure that contractual arrangements and deal structures are VAT efficient.

    Get more VAT advice

    In addition to mergers and acquisitions, our team of expert advisers can offer support and advice on a range of  VAT matters.

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    Please provide as much detail as possible in regards to the reason for your enquiry so our tax advisers can prepare and tailor their response to reflect your needs. We will endeavour to - respond / call you back - to discuss your enquiry and you will not be charged for this time.

  • This field is for validation purposes and should be left unchanged.