Inheritance tax can be an unexpected issue for the buyer in the context of a share sale. Although the transferor is primarily liable for the IHT on a transfer of value, any person whose value of estate is increased by the transfer can become secondarily liable to pay the tax. Where IHT remains unpaid, Inland Revenue charges and powers of sale relating to IHT can encumber shares in, or assets owned by, any company (close or non-close). Accordingly, IHT should be considered in the context of a tax covenant given to a buyer in a share sale, due to the way IHT operates, in particular the possibilities of powers of sale and Inland Revenue charges, quite specific drafting should be included to protect the buyer.
