How should a buyer handle a company with historic HMRC tax liabilities?

Start by identifying the exact liabilities, open enquiries, settlement status, statutory deadlines, and available reliefs. Do not rely only on the seller's summary or HMRC's opening demand.

Can tax liabilities be used to negotiate a lower acquisition price?

Yes. If due diligence reveals overdue taxes, weak dividend records, unresolved HMRC enquiries, or possible PAYE and National Insurance exposure, the buyer can use that risk to negotiate price reductions, indemnities, warranties, or revised payment terms.

Why does dividend documentation matter when buying an SME?

Regular owner withdrawals labelled as dividends can be challenged if they look like salary and are poorly documented. In a share purchase, that risk can become a corporate liability for the buyer unless it is addressed before completion.

Dealmakers Podcast

Buying A Business With HMRC Tax Liabilities

Former tax inspector Chris O'Hara explains how buyers can assess HMRC investigations, historic tax liabilities, disguised remuneration schemes, overdue VAT, PAYE, National Insurance, and corporation tax before completing an acquisition.

Listen to the Episode

Episode 159 | Runtime: 34:01 | Audio Episode

Listen to the Episode

Hear Chris O'Hara explain how HMRC tax issues can be investigated, negotiated, reduced, documented, and used as leverage during a business acquisition.

Episode

159

Runtime

34:01

Topic

HMRC tax liabilities in acquisitions

Format

Expert interview with Chris O'Hara

Key Takeaways

Three acquisition lessons for buyers dealing with tax risk, HMRC pressure, and seller disclosed liabilities.

HMRC Claims Need Commercial Review

A tax demand is not always the final number. Chris explains how statutory time limits, reliefs, corporation tax deductions, interest, and settlement mechanics can materially change the amount payable.

Historic Tax Liabilities Can Strengthen Negotiation

Overdue VAT, PAYE, National Insurance, corporation tax, weak dividend documentation, and open HMRC enquiries can justify price reductions, deferred consideration, warranties, or indemnities.

The Buyer Can Reframe The HMRC Conversation

A new owner who did not create the problem may be able to position themselves as the person rescuing the business, preserving jobs, and creating a credible path to settlement.

Episode Breakdown

In this episode, Jonathan Jay speaks with Chris O'Hara, a former tax inspector and chartered tax adviser who now helps companies handle HMRC investigations, overdue payments, disguised remuneration schemes, and tax avoidance settlements. Chris explains why business owners can feel intimidated by HMRC and why the first step is to understand the real issue rather than accepting the demand at face value.

The conversation moves into practical acquisition due diligence. Chris explains how a buyer should investigate open and closed HMRC enquiries, request settlement documentation, assess PAYE, National Insurance, VAT, corporation tax, EBTs, loan charge exposure, and check whether historic schemes were settled fully or only in part. He also explains why weak dividend documentation can create corporate liabilities that matter when buying shares in an owner managed business.

For acquisition entrepreneurs, the episode is especially useful because it shows how tax problems can affect price, structure, and buyer protection. Chris outlines how liabilities can support negotiation points, how warranties and indemnities can shift risk back to the seller, and how a buyer may approach HMRC as the new owner who wants to fix inherited problems and protect the company.

Best For

Buyers assessing a business with overdue VAT, PAYE, National Insurance, or corporation tax.
Acquisition entrepreneurs using tax risk to negotiate price, deferred consideration, warranties, or indemnities.
Dealmakers reviewing HMRC enquiries, closure notices, EBTs, disguised remuneration schemes, or loan charge exposure.
Buyers considering a share purchase where historic corporate liabilities remain with the company.
Advisers and operators who need a sharper due diligence checklist for owner managed businesses.

Questions Answered In This Episode

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