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Due Diligence and Tax Risk

 
Aileen Barry Director National Tax Investigations at law firm DLA Piper Rudnick Gray Cary UK LLP warns of the latent dangers arising from due diligence reports
 
The reader may be forgiven for thinking this is a contradiction in terms. Surely the whole purpose of a due diligence report is to warn of risk and enable such risk to be measured and then mitigated removed or insured against.1
 
The danger arises when the acquiring company relies too heavily upon the tax warranties or indemnities to cover the risk or factors the quantum of the tax risk into the acquisition price thus self-insuring the risk as it were. In such cases the newly formed company frequently takes no action to approach Her Majesty's Revenue and Customs (HMRC) to...
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