Mergers & Acquisitions
7. Tax Payment by the Group
Last updated: 06 Jul 2015
- The head company is responsible for the tax liability of the group. The members of the group are jointly and severally liable if the head company fails to comply. This means that any or all of the subsidiary companies may be required to cover the liabilities of all or some of the group members.
- You can avoid joint and several liability of group members if a tax sharing agreement (TSA) is entered into between the entities in the group. Groups can also enter into tax funding agreements (TFA).
- Tax sharing agreements operate when the head company defaults in paying a group liability. In this situation the liability is apportioned between the group members according to the TSA.
- A tax funding agreement is intended to show how the tax liability is to be funded between the members of the group.
- Although it may be possible to enter into a combined TSA/TFA agreement a careful analysis must be undertaken before adopting a single agreement.
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