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A client of mine is negotiating to purchase a UK limited company.  As part of the due diligence it has been established that the company has not filed any P11ds since it started although there has been qualifying benefits in kind for the past few years which should have been declared.

We have also established that there was a genuine mistake on a vat return resulting in a signficant under declaration last year. Both these matters were flagged to us by the company accountants who were only engaged last year. Regardless of whether my client buys the company or not what obligations are there on the directors and their recently engaged accountant to ensure these matters are corrected. Does it constitute fraud if the owners ignore the recommendations of their accountants. If the directors are adamant that they will not rectify these ommisions where does that leave the accountants?  

Needless to say, my client has decided that they will not proceed unless they put their house in order.   



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By lionofludesch
23rd Mar 2018 18:39

I would suggest that the accountants would be obliged to submit an SAR should the company not correct the errors.

In theory your client could buy the company for a reduced price and correct the errors himself. But I'd be concerned at what else was in there.

Transfer the trade to a new company, perhaps ?

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By brash
23rd Mar 2018 22:55

We have thought about doing and asset purchase but the new company would have to reapply to get on tender lists etc

thanks for your comments

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By atleastisoundknowledgable...
23rd Mar 2018 23:18

I have a client who is going through a faze of buying companies. During his due diligence, he has initially his in house people, then me, scrutinise the company’s books to identify potential tax ‘issues’, which are then used as negotiating tools and sellers warranties obtained in the SPA. There’s often a final sum of the sale price withheld until any potential tax issue is past its investigation deadline.

Just realised that that wasn’t your question, but hopefully of some help if the acquisition does go through. Get a sellers warranty on any P11D comeback, deduct the vat error & any potential fine from the sale price.

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Replying to atleastisoundknowledgable...:
By tonycourt
26th Mar 2018 23:35

What's a "faze"?

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