should then be the following exclusions, assuming that the wording of the tax covenant makes them necessary:
5.2.1 in respect of any Tax Liability to the extent that it was provided for in the Last Accounts;
5.2.2 in respect of any Tax Liability to the extent that payment was made on or before the Last Accounts Date;
5.2.3 in respect of any Tax Liabilities relating to the normal course of the business of the Company in the period between the Last Accounts Date and Completion.
5.3 A related subject when dealing with a transaction involving Last Accounts, is the status of Reliefs arising in the period between the Last Accounts Date and Completion: the Buyer conventionally accepts both the profits and the related Tax Liability for the stub period between the Last Accounts Date and Completion. This is on the assumption that these profits and Tax Liabilities relate to the normal business of the Company. It is therefore entirely consistent that the Buyer should be entitled to the Reliefs that might arise in this period. 5.4 This then leads to the question as to the entitlement to the Reliefs in this period if they do not relate to the normal business of the Company. If a capital gain is made in this period, it is very likely that the Covenantors would be liable for the tax arising as the gain would not be within the normal course. It would therefore be logical for the Covenantors to have the benefits of Reliefs to the extent that they do not stem from the normal course.
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