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It’s time for a fresh look at deeds of indemnity and how they work, insist JASON FAYERS and ANDREW STRICKLAND
KEY POINTS
- The tax covenant is designed to protect the business buyer.
- Are there inconsistencies in which potential liabilities are provided for?
- How does the covenant treat timing differences?
- An alternative approach incorporating corresponding savings could benefit both parties.
- The specifications of the new tax covenant.
Tax deeds of indemnity tax deeds or tax covenants – regardless of the description used for these documents they are a regular feature of corporate transactions.
A tax covenant is a covenant or promise to make payment in certain stated circumstances and it is therefore a document of some considerable power.
The simple essence of the covenant is that the buyer wishes to be protected from unexpected tax liabilities.
The protection in the document takes the form of...
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