CHAPTER SIXTEEN
TAX RETURNS
9.1The Covenantors or their duly appointed agents shall, at the Covenantors’ cost:
9.1.1 prepare, submit and deal with all computations and returns relating to Tax Liabilities; and
9.1.2 prepare, submit and deal with all claims, elections, surrenders, disclaimers, notices and consents for the purposes of Tax Liabilities in respect of all periods relevant for the purposes of Tax Liabilities ending on or before Completion.
Executive Summary
A The allocation of powers and obligations in respect of the submission of tax computations requires the balancing of the requirements and concerns of the two sides: the Covenantors are concerned that the Buyer should procure that the Company takes the action that they consider is appropriate in order to ensure that the Tax Liabilities for which they are responsible are not overstated. The Buyer is concerned to operate the affairs of the Company in a proper manner and not to put the Company at any sort of risk, including reputational risk. The Buyer also does not want what he may consider to be interference with respect to the taxation affairs of the Company once it is in his control. B The Computations for the periods up to Completion are accepted as being the prime responsibility of the Sellers. The Sellers will normally wish to submit tax computations for completed periods prior to Completion. The Buyer will normally be very content with this. This work will be done at the expense of the Company: the above clauses are only related to post-completion costs. C The Buyer will normally resist a blanket right of the Sellers to make inputs with regard to the tax computations in the period which straddles Completion and also the later accounting periods. A relatively standard compromise is for the Buyer to be obliged to notify the Sellers if he is aware that a tax computation to be submitted is likely to trigger a claim under the tax covenant. He then normally has an obligation, acting reasonably, to have regard to the inputs of the Sellers.
D It is not usual for the Buyer to give any rights of input with regard to tax computations relating to periods commencing after Completion.
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