claims are made under the tax covenant, such an Understatement can reduce the amount payable, or trigger a refund of sums already paid.
14.2 It is arguable that this definition is not needed as Understatements should be a sub- set of Sellers’ Relief.
14.3 The Buyer may reasonably wish to amend this to exclude any Understatements to the extent that they reflect a retrospective change in rates or allowances.
14.4 The Seller protections of Overprovisions, Understatements, Sellers’ Reliefs and Recoveries are sometimes limited so that they only result in a credit for the Covenantors in respect of the same matter which gave rise to the Tax Liability. This raises all sorts of technical problems. It is our view that this is an excessive restriction and that the Covenantors should resist this approach. If there has been such a credit it seems reasonable that the Buyer should recognise this and should only recover the net tax cost from the Covenantors.
15In the Ordinary Course of Business
1.5 Any reference to something occurring in the ordinary course of business shall, without prejudice to the generality thereof, be deemed not to include:
(i)
any interest, penalty, fine or surcharge in connection with taxation;
(ii)
any legal, entertaining or other revenue expenditure which is not deductible against the profits of the Company, and which is greater than the rate of such expenditure as disclosed in the latest set of tax computations of the Company as provided to the Buyer before Completion; (iii) any taxation (other than PAYE or employee NICs) which is primarily attributable to another person, but only to the extent of the amount not recovered from that person;
(iv)
any failure to deduct tax, or any failure to deduct, charge, recover or account for tax;
(v)
any Taxation arising from the Company being treated as the UK representative of a non-UK person;
(vi)
any transaction where the consideration for tax purposes is different to the actual consideration (but only to the extent of the difference);
(vii) any deemed (as opposed to actual) disposal for tax purposes;
(viii) any transaction which is not entered into on arm’s length terms, including the waiver of debt;
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