11.2 It is important that the competence of any authority purporting to charge tax on the Company is included somewhere in the tax covenant. If it is not included in the definition of Tax Authority, it needs to be included in the definition of Tax or Taxation. The Covenantors need comfort that claims can only be made in the tax covenant for valid taxation charges: it is not beyond the wit of man to envisage some fraud developed in which companies receive a communication bearing a whiff of officialdom; these communications then demand that payment is made for some spurious tax demand, possibly relating to an overseas transaction. The Sellers need to be protected from the Buyer making such payments recklessly on the basis that recovery can be made under the tax covenant.
12“Tax Claim”
1.2.11 “ Tax Claim” means:
(i)
any claim, notice, demand, assessment (including self-assessment), letter or other document issued, or action taken, by or on behalf of any Tax Authority or person, or
(ii)
the preparation or submission of any notice, return, assessment, letter or other document by the Buyer, the Company, or any other person,
(iii)
from which it appears that the Company is or may be subject to a Tax Liability or other liability in relation to which the Buyer could make a claim under this Deed, or from which it appears that any Corresponding Saving, Overprovision, Understatement or Seller’s Relief may be reduced.
12.1 Under the regime of self-assessment, tax claims are as likely to be events which are reported by the Company itself, and it is clearly important that self-assessment is included within the definition of Tax Claim, either explicitly, as above, or by the use of the working in (ii) above.
12.2 This definition is used in the clauses of the tax covenant dealing with the requirement of the Buyer to notify the Covenantors of a potential Tax Liability.
13“Tax Liability”
1.2.12 “ Tax Liability ” shall mean any liability of the Company to make payment of or in respect of Tax to the extent that such payment has not been made prior to Completion, and whether or not the Company has or may have any right of reimbursement against any other person or persons, and shall include instalments of corporation tax payable pursuant to the Corporation Tax (Instalment Payments) Regulations 1998, but shall also include: (i) the loss, utilisation or reduction of any Deferred Tax Relief which would (were it not for the said loss, utilisation or reduction) have been available to the Company in which case the amount of the Tax Liability will be the
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