Tax Free Exits

Welcome to the first edition of our data driven 'Tax Free Exits report'. Designed for deal execs and tax directors at private equity houses, we use our unique position as advisers on private equity M&A transactions, to help navigate tax risks uncovered in due diligence that are excluded from Warranty & Indemnity insurance.

Across 2022 and 2023, 85% of deals utilised W&I insurance of which 89% of policies had a £1 cap for warrantors. We have drawn on over 188 data points in due diligence reports to identify the tax risks most likely to arise on your transactions for which no cover usually provided.

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60%

Employment Related Securities

28%

Recovery of VAT on transaction costs

16%

Claiming Research & Development credits

15%

Off-payroll workers, also known as IR35

In Tax Free Exits we explain how these issues arise, why they are problematic and how to resolve them. We are also delighted to have contributions from colleagues we work with regularly covering the hot-topics of:

Share valuations on transactions

This topic is inextricably linked to the Employment Related Securities risk identified in 60% of our data pool

US sales tax and the question of nexus

This is the largest recurring overseas' tax issue in our data pool.

Delivering an effective underwriting process to maximise the insured tax cover

A process not to be overlooked particularly because, as Howden notes, tax claims comprise the single largest category of W&I claims

As market leaders, we really do bring an unrivalled perspective on the tax landscape of PE transactions and are pleased to share this with you.

Our Travers Smith Tax Team are always delighted to chat tax so please do feel free to call any of us to discuss any tax questions you may have .

I hope you find Tax Free Exits a useful guide as you plan for exit. If there is anything you would like to see in the next edition please do let me know.

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The firm is always able to provide a pragmatic and commercial response

Unique depth of private equity experienced lawyers with excellent resource and execution skills

Clear, confident advice, from a team at the top of their game

Overview

The top 4 tax risks identified in our data set were: