9.4 The additional £30,000 of tax losses would not be included as a Deferred Tax Relief as they were not included in the deferred tax calculations. They would not feature as an Accounts Relief as they were not reflected as a tax recoverable balance in the accounts. They would not feature as a Post-Completion Relief as the Event which gave rise to these losses were the trading results of the Company before Completion. Although the computational error was identified and adjusted after Completion, we do not consider that it was this identification and adjustment which was the Event which gave rise to these losses. The additional £30,000 of tax losses is not an Overprovision as deferred tax provisions are expressly excluded. It is not a Recovery as it does not represent a recovery from another party, as it just increases the tax losses at Completion. It is neither a Corresponding Saving, nor an Understatement as it meets none of the definitions. The inclusion of this definition of Sellers’ Relief is therefore needed in order to cover this situation. 9.5 As the additional losses are not a Buyer’s Relief, they are a Seller’s Relief as they arise in the Company before Completion. The losses can therefore be used to cover other computational adjustments which may result in Tax Liabilities giving rise to a claim under the tax covenant.
9.6 Sometimes this is more widely drawn with words such as “.. any Relief which is not a Buyer’s Relief.”
9.7 It is only reasonable that the clause should normally be limited to the period to Completion. If it is also limited to the Company, then there may need to be express provisions included relating to any group relief to be surrendered from the Seller group to cover Tax Liabilities that might arise and result in a claim under the tax covenant.
10 “Tax” or “Taxation”
1.2.9 “Tax” or “Taxation” includes (without limitation) all forms of taxation and statutory, governmental, state, federal, provincial, local government or municipal charges, duties, levies, imposts, withholdings, social security contributions, deductions or amounts in the nature of taxation, whenever and by whatever Tax Authority imposed and whether of the United Kingdom or elsewhere, irrespective of the person against or to whom the same are directly or primarily chargeable, together with all interest, fines, penalties, surcharges, imposed pursuant to any legislation relating thereto, but excluding business property rates;
10.1 This is clearly another extremely broad definition, aiming to cover all possible forms of taxation that may be of relevance.
10.2 It should be noted that the definition is not limited to amounts which are payable by the Company. There have been cases in the past where over-zealous drafting has led to the Covenantors being liable for the stamp duty payable by the Buyer on the purchase of the shares in the Company. Protection against this unforeseen exposure is normally now obtained elsewhere in the tax covenant, by narrowing the tax in question to tax for which the Company is either primarily or secondarily liable.
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