5
Stamp Duty
2.1.5 any stamp duty liability of the Company (including any interest, fines or penalties) which is chargeable on any instrument executed prior to Completion where:
(i)
it is necessary to produce the document as a result of the refusal of a Tax Authority to allow a Relief to the Company without the production of such document; or
(ii)
such document is required as evidence in civil proceedings or a hearing (having force of law) before an arbitrator or referee; or
(iii)
such document is necessary to effect registration in respect of this holding of an asset and such registration is necessary to protect the rights of the holder in respect thereof; and
5.1 This type of clause is to cover stamp duty that has been avoided by completing transactions outside the UK: the Event which gives rise to the Tax Liability is the decision to bring the document into the UK to be stamped, and the main operative clause is therefore extended to ensure that the Sellers are liable for this cost. 5.2 As noted in Chapter four, such a clause is probably void due to the operation of Section 117, Stamp Act 1891 in respect of indemnities given relating to stamp duty. Although a tax covenant is technically not an indemnity it is certainly a contract, arrangement or undertaking. The increasing practice in this area is to deal with stamp duty as a specific warranty, with stated consequences if the warranty is breached, in order to avoid this problem.
6 IHT Liabilities
2.1.6any IHT Liability; and
6.1
The technical issues in this area have been covered under chapter 4.
7 Post-Completion Event
2.1.7 any Tax Liability in respect of any Event completed after Completion in respect of a legally binding obligation or arrangement, in either case whether or not conditional, incurred or entered into on or before Completion; and 7.1 This clause is to be rejected due to its unintended breadth: a transaction as basic as a normal sales transaction could be caught by this clause: a sales order taken before Completion, but fulfilled afterwards will result in the profit being recognised in the period after Completion, but with the Sellers being liable, under this clause, for the Tax Liability in respect of the profit made on that sale.
123
Made with FlippingBook Learn more on our blog