10.3 Interest, fines, penalties and surcharges are also included in the definition: the Buyer will be concerned to ensure that interest and penalties relating to the period after Completion are included within the protection of the tax covenant. He will understandably be aggrieved if he is able to claim interest up to Completion, but not thereafter. The above definition refers to all interest and penalties relating to the tax in question, but it is then important to make sure that the limitations and exclusions elsewhere do not limit the claim to such costs up to Completion only. 10.4 From the viewpoint of the Covenantors, they will be concerned to make sure that this does not result in an element of double claiming in respect of interest. This point is developed later in this publication. In simple terms the tax covenant should not result in the Covenantors paying both an amount equivalent to the late payment surcharge levied by HMRC and also interest on the late payment under the tax covenant. 10.5 The Covenantors will also be concerned that they are notified of the Tax Claim at an early stage and that the interest charge will cease soon after they make payment to the Buyer in respect of the Tax Liability. 10.6 It is our experience that Buyers will seek to include business rates as part of the definition of Taxation, but that this point will be conceded with relative ease, and that business rates will effectively be treated as normal, non-tax expenditure. This is largely a matter of custom and practice: there is no inherent logic as to why business rates should be included or excluded from the special protections given to the buyer through the tax covenant. 10.7 There are some definitions of “Taxation” which endeavour to list the various forms of taxation, including such rare vintages as Selective Employment Tax. Such clauses are becoming increasingly uncommon as there will always be a potential weakness in the tax covenant if the tax in question is overlooked in the definition. 10.8 There is a growing trend to expressly exclude stamp duty from the definition of Tax, and to deal with this by means of warranty, rather than under the main operative covenant. This is due to the wording of Section 117, Stamp Act 1891 which states that indemnities given in respect of stamp duty are void.
11 “Tax Authority”
1.2.10 “Tax Authority” means the Inland Revenue, HM Customs and Excise, HM Revenue and Customs, the Department of Social Security and any other governmental or other authority whatsoever which has the competence to impose or collect any Tax whether in the United Kingdom or elsewhere;
11.1 This definition includes both HMRC and its two legacy bodies. A rather briefer definition is:
“means any authority which is competent to impose any Tax whether in the United Kingdom or elsewhere;”
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