The inclusion of the four definitions of Understatement, Overstatement (in respect of assets) and Underprovision, Overprovision (in respect of liabilities) enables the tax covenant to be moved onto the accounts basis as the measure of loss.
1.3 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;
(ix) any distributions or deemed distributions, including payments made for the benefit of participators of close companies;
(x) any transaction chargeable under the provisions of the Taxation of Chargeable Gains Act 1992;
(xi) any action which involves, or leads directly or indirectly to, a change of residence of the Company for Tax purposes;
(xii) any event which had as its main purpose the avoidance of tax;
(xiii) any transaction covered by Part XVII, ICTA 1988 (Tax Avoidance);
(xiv) any changes to the share capital of the Company.
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