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Introduction to buying a company

There are many tax related matters to consider when one company purchases the shares of another. Whilst tax is a major factor in this type of transaction, the impact of any potential tax consequences must be balanced with other wider commercial factors. This guidance note is written from the perspective of the acquiring company (or group of companies). Some of the relevant considerations are set out below, split between pre- and post-completion matters for ease of reference. More detailed commentary can be found in Tolley’s Tax Planning 2022–23, Chapter 3, ‘Buying a company’.

It should be noted that distressed company purchases give rise to a range of additional issues, which are not covered in this note. For an overview of some of the relevant matters to consider in this regard, see ‘Distressed company purchases’, by Eloise Walker in Tax Journal, Issue 1140, 21 (28 September 2012).

Pre-completion matters

The directors of the acquiring company will work with many different advisers throughout the transaction to acquire shares