The above clauses are based on the simple concept that the tax liabilities should be treated in the same way as adjustments to the Consideration arising from the Completion Accounts. It is relatively standard in transactions involving Completion Accounts for the amount of the Consideration to be estimated at Completion, with a cash adjustment when the actual levels of the Completion net assets are agreed or determined.
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DUE DATE FOR PAYMENT (2)
4.1 The due date for the making of payments under this Deed shall be the date falling 5 Business Days after the Buyer has served a written notice on the Covenantors setting out the relevant details of the Tax Cost and demanding that payment or, if later: (a) in respect of an Underprovision ,or Overstatement of Deferred Tax , five Business Days prior to the date which is 21 months after the Last Accounts Date; or (b) in respect of an Underprovision or Overstatement of any other Tax, five Business Days prior to the date upon which the payment or repayment of Tax was due or was considered to have been due to or from the relevant Tax Authority; or (c) in a case that falls within paragraph (iii) of the definition of Tax Cost (use of Post Completion Relief or use of Buyer’s Group Relief ) five Business Days prior to the date on which the Tax would have been payable if the Relief in question had not been utilised or set off; or (d) in the case of costs and expenses, within clause 2.6 of this Deed, the date which is twenty days after the date on which invoices are received in respect of such costs and expenses. 4.2 If any payment due to be made by the Covenantors under this Deed is not made on the due date for payment, then except to the extent that the Covenantors’ liability under clause 2 compensates the Buyer for the late payment by virtue of it extending to interest and penalties, the Covenantors shall pay interest on such sum for the period from and including the due date up to the date of actual payment in accordance with this clause. The Covenantors shall pay interest at the Interest Rate. Interest under this clause shall accrue on the basis of the actual number of days elapsed and a 365 day year and shall be paid by the Covenantors on demand. Unpaid interest shall be compounded annually. The above clauses are based on the concept that the timing of payments should remain as close as possible to the current practice. The treatment of Corresponding Savings in the classic tax covenant can create practical problems in respect of the timing of repayments. There is no provision in the classic tax covenant for deferred tax which is underprovided. In response to these two issues, we are proposing that
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