PD Tax were appointed to assist a group of shareholders in selling their business to a third party. It was important to them that they sold their shares in the company to optimise their tax positions.
However, after carrying out due diligence, the buyers decided that they did not want to buy the trading company from the sellers because they thought that the company had undertaken an aggressive employee benefit trust (EBT) tax arrangement in the recent past (PD Tax did not advise on the EBT arrangement).
The buyers suggested that they buy the trade and assets from the trading company, as they were still keen to make the acquisition. However, this was not in the interests of the sellers because this meant that they would suffer a much higher rate of tax than if they sold the shares.
Therefore the EBT became a sticking point in the deal.