Why tax due diligence matters in Mergers & Acquisitions

Tax due diligence is a crucial, yet often underestimated step in UK mergers, acquisitions, and investment deals. It’s not just about reviewing tax returns; it’s about uncovering hidden risks, ensuring compliance, and protecting your investment from unexpected liabilities.

What does tax due diligence involve?

• Identifying risks: Spot unpaid or underpaid corporation tax, PAYE/National Insurance issues, VAT errors, and anomalies in Stamp Duty Land Tax.
• Ensuring compliance: Confirm all statutory filings are up to date, employment taxes are correct, and reliefs like R&D credits are claimed legitimately.
• Structuring for efficiency: Early due diligence can guide whether to pursue a share or asset purchase, plan deal timing, and assess valuable tax reliefs.

Why it’s worth the effort

• Negotiation power: Findings can justify price adjustments, require warranties, or set up escrow to cover potential HMRC claims.
• Stakeholder confidence: A clean tax record reassures investors and lenders, smoothing the path to integration.
• Avoiding surprises: Proactive checks help prevent costly issues after the deal is done.

Tax due diligence is more than a box-ticking exercise, it’s a strategic safeguard that protects value, reduces risk, and gives all parties confidence in the transaction. Skipping it could mean inheriting problems you never expected.

Need help?

Contact your usual Larking Gowen adviser or email enquiry@larking-gowen.co.uk for support.

Ben Greves