amount of Tax which would have been saved if the Deferred Tax Relief had not been unavailable;
(ii) the loss or reduction in the amount of, or the setting off against any Tax Liability for which no provision has been made in preparing the Completion Accounts, of an Accounts Relief , in which case the amount of the Tax Liability will be the amount of the reduction of the Accounts Relief; and
(iii)
the loss or reduction in the amount of, or the setting off against income, profits or gains earned, accrued or received on or before the Completion Date or against any Tax Liability, of any Post-Completion Relief or Buyer’s Group Relief in circumstances where, but for such loss, reduction or setting off, the Company would have had a Tax Liability in respect of which the Buyer would have been able to make a claim under this Deed, in which case the amount of the Tax Liability shall be the amount of Tax saved or relieved by the Company as a result of such set off or use;
13.1 This definition works mechanically so that the claims under the tax covenant cover not only the payments in respect of taxation, interest and penalties, but also the loss of any of the constituent parts of Buyer’s Relief. Therefore, the carry back of losses from the post-completion period or the utilisation of tax losses which are included as a component in the deferred tax account create notional costs which can be recovered from the Covenantors under the tax covenant. 13.2 Sub section (iii) deals with both the carry back of losses from the post completion period and also the use of Reliefs from the Buyer’s Group. The measure of loss is therefore the tax that would have been payable by the Company if these Reliefs had not been available. 13.3 As mentioned previously, the word “Relief” encompasses both gross and net definitions. It is therefore the definition of “Tax Liability” above which then gives the further information as to the way that the different Reliefs are to be measured.
14 “Understatement”
1.2.13 “ Understatement ” means any amount by which the assets in respect of Taxation of the Company (other than in respect of deferred tax) are greater than the amounts at which they are stated in the Completion Accounts for reasons other than the use of a Buyer’s Relief; 14.1 This is the last of the set of the seller protections: if the Completion Accounts include a VAT recoverable asset of £49,000, and it is found that this is understated by £6,000, as VAT on certain expenditure has not been claimed, in error, then this £6,000 will normally be accepted as being a potential benefit to the Sellers. In the event that any
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