5 Increase in Tax Rates with Retrospective Effect
3.1.4 s uch Tax Liability arises or is increased by reason of any increase in rates of Tax announced after Completion;
5.1 It is generally accepted that the Sellers have an obligation for all taxes up to the pivot point, at the rates announced up to Completion. They settle this obligation by making provision for the Tax in the Last Accounts or the Completion Accounts or by making payments under the tax covenant if the provisions are insufficient. 5.2 However, it is also generally accepted that the risks of increased liabilities arising from changes in tax rates with retrospective effect are to be borne by the Buyers as part of the risks taken on in running the Company. There is no complex technical reason as to why this should be the case: this is simply a matter of custom and practice, based on the assumption that any person carrying on business is always open to the risk of retrospective changes in Tax rates. 5.3 There is then an equally compelling argument that the Sellers should not gain the benefit of overprovisions arising from retrospective rate changes: if such risks are accepted as belonging to the Buyer, then it is only equitable that the rewards should also belong to him. This is developed further in chapter 15. 3.1.5 such Tax Liability arises or is increased by any change made or announced in legislation, including the enactment after the Completion Date of any legislation relating to Tax and the imposition after the Completion Date of any new Tax; 6.1 This is a close cousin of the previous exclusion: again, it is accepted that the Buyer should be prepared to take on this risk, again as part of the normal risks of running a business. 6.2 Again this needs to be twinned with the appropriate overprovisions clause as covered in chapter 11: as the Buyer takes on the risk of changes in legislation, the Covenantors should not have the benefit of any retrospective changes which reduce or remove liabilities. 6 Retrospective Changes in Legislation
7 Changes to Published Practices or Procedures
3.1.6 such Tax Liability arises or is increased by any change in the published practice or procedure of the relevant Tax Authority taking effect after Completion;
7.1 This is another very close cousin: it recognises that Statements of Practice, Extra Statutory Concessions and the views of HMRC as expounded in their Manuals are now a major part of the tax regime as operated from time to time.
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