Secondary liability risk in an M&A context

What are ‘secondary liability’ provisions?

In broad terms secondary liability provisions give HMRC the power to enforce outstanding tax debts against ‘secondary’ parties. The policy rationale for this is that in some cases it may be impractical or impossible to secure payment from the primary tax debtor. Whilst the reason for having these rules can be readily understood their potential breadth of application is not always fully appreciated on M&A transactions.

Historical guidance published by HMRC indicates that the provisions are unlikely to be applied where tax avoidance is not an issue...