Tax planning considered provocative by the authorities can hold up the sale of a business for years, an expert has warned.
Paul Edwards, Tax Director at the Midlands office of national audit, tax and advisory firm Crowe Clark Whitehill, cautioned that potential purchasers would be likely to take fright in such circumstances.
To get the best outcome and price, a business needs to be groomed for sale over perhaps two to three years, often longer.
As part of that, tax is, said Mr Edwards, a crucial element.
“Apart from what I would call compliance matters – making sure that all tax filings are on time and having appropriate processes in place to ensure that they are as accurate as they reasonably can be, it is increasingly important to consider the potential repercussions before involving the business in any tax planning that might be provocative and invoke interest from HM Revenue & Customs,” he said.
“Entering into such ‘schemes’ or arrangements is fraught with danger.
“It could ultimately lead to the full appeal process, possibly including an initial referral to the General Anti Abuse Rule (GAAR) panel and then going on through the entire Court process – First Tier Tribunal, Upper Tribunal and The Supreme Court.
“It is estimated currently that it takes between 10 and 13 years from tax planning implementation through to the end of the appeal process, and that is for pre-GAAR cases. It is anticipated that GAAR could add two years or more to this.”
Mr Edwards added: “Trying to sell a company with such issues hanging in the balance is always going to be tricky, and will put off many would-be purchasers from even contemplating proceeding.
“This is therefore a very important factor to consider before entering into any tax planning, if a business disposal is contemplated within about the next 15 years!
“Professional advice should be sought as appropriate.”