CHAPTER TWELVE
DEDUCTIONS FROM PAYMENTS
5.1 The Covenantors shall pay all sums payable by them under this Deed free and clear of all deductions and withholdings, unless the law requires a deduction or withholding to be made. If a deduction or withholding is so required the Covenantors shall pay such additional amount as will ensure that the net amount the Buyer receives equals the full amount which it would have received had the deduction or withholding not been required. 5.2 If either party to this Deed shall have assigned the benefit in whole or in part of this Deed then the liability of the other party under this clause shall be limited to that (if any) which it would have been had no such assignment taken place.
Executive Summary
A The clause relating to deductions from payments is now standard in tax covenants. It is difficult to see why it is required in respect of payments under the tax covenant as these will not be required, under existing tax legislation to be paid under deduction of tax. B If the Sellers are required to make payment to someone other than the Buyer, then the payments will, almost certainly, be taxed on the recipient. The second clause above is as unnecessary as the first clause: the real protection in this area is required in respect of the grossing up clauses.
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