Chapter CG14815

Record NumberCG14815
Published date12 March 2016

Warranties and representations often form an important part of the agreement for the sale of an asset of any value, especially shares in a private company. The warranty is an assurance given by the vendor as to the state or nature of the asset being sold. Usually the form of the warranty will be suggested by the purchaser and will consist of a series of factual statements about the asset being sold. The vendor can either accept, object or make a disclosure against the warranty. Commercially this performs the important function of allowing the purchaser to seek information about the asset being purchased. The warranty also allows the purchaser to seek restitution if they suffer damage as a result of breach of the warranty.

Although the primary motive for a warranty is unlikely to be tax driven they are included in TCGA92/S49 to avoid the need to make valuations and to align the disposal proceeds brought into the tax computation with the net amount actually received by the vendor.

Where an election has been made under TCGA92/S171A, so that a disposal actually made by Company A is treated as having been made by Company B, the computation can be adjusted under TCG...

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