Free UK Tax Deed (Tax Covenant) Template

TAX DEED

Tax Covenant · Executed As A Deed · England And Wales  ·  Limitation Act 1980 S.8  ·  2026-05-15

This Tax Deed (this "Deed") is made on 2026-05-15 between Thornton Holdings Limited (Companies House No. 11234567) of 14 King Street, London, EC2V 8EA (the "Seller") and Hartwell Ventures Ltd (Companies House No. 14887654) of 7 Canada Square, Canary Wharf, London, E14 5AB (the "Buyer"). It is given in connection with the Share Purchase Agreement (SPA) dated 2026-05-15 between the Seller and the Buyer in relation to the Company. This Deed is executed as a deed under section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 and (where a party is a company) section 46 of the Companies Act 2006, taking advantage of the twelve-year limitation period in section 8 of the Limitation Act 1980. The parties intend that the Seller covenant in this Deed shall apply on a pound-for-pound basis and shall not require the Buyer to prove loss.

In this Deed, unless the context otherwise requires:

"Accounts" means the audited statutory accounts of the Company for the accounting reference period ending on or last before Completion.
"Business Day" means any day other than a Saturday, Sunday or public holiday in England and Wales.
"Buyer's Group" means the Buyer and any subsidiary undertaking of the Buyer from time to time (sections 1162 and Schedule 7 of the Companies Act 2006).
"Company" means Thornton Analytics Ltd, a company registered in England and Wales under number 09876543.
"Completion" means completion of the Share Purchase Agreement (SPA) on 2026-05-15.
"Event" means any event, act, omission, transaction, payment, receipt, distribution, dividend, recovery, write-off, decision, election, claim, surrender or other circumstance whatsoever and includes Completion itself.
"Relief" means any loss, relief, allowance, exemption, set-off, deduction, credit or rebate available against or in respect of Tax (including any right to a repayment of Tax).
"Seller's Group" means the Seller and any subsidiary undertaking or holding company of the Seller from time to time, excluding the Company.
"Tax" or "Taxation" means any tax, levy, duty, contribution, impost, withholding, deduction, charge or amount of a tax nature imposed, collected or assessed by, or payable to, any Tax Authority anywhere in the world, including (without limitation): (a) corporation tax under the Corporation Tax Act 2009 and the Corporation Tax Act 2010; (b) income tax under the Income Tax Act 2007 and the Income Tax (Earnings and Pensions) Act 2003; (c) capital gains tax under the Taxation of Chargeable Gains Act 1992; (d) value added tax under the Value Added Tax Act 1994; (e) stamp duty and stamp duty reserve tax under the Stamp Act 1891 and Part III of the Finance Act 1986; (f) stamp duty land tax under the Finance Act 2003; (g) inheritance tax under the Inheritance Tax Act 1984; (h) all national insurance contributions; and (i) any payment by way of, or representing, Tax — together with all interest, fines, penalties, surcharges and other charges incidental to such Tax.
"Tax Authority" means any taxing or other governmental authority (whether of the United Kingdom or elsewhere) competent to impose, administer, assess or collect Tax — including, in the United Kingdom, His Majesty's Revenue and Customs (HMRC).
"Tax Claim" means any assessment, notice, demand, determination, enquiry, dispute or other action by a Tax Authority — or any self-assessment by the Company — that gives rise to, or may give rise to, a Tax Liability.
"Tax Liability" means any liability of the Company to pay or account for Tax (whether or not the Company is primarily liable, and whether or not the Company has the right of reimbursement from any other person).
"SPA" means the Share Purchase Agreement (SPA) dated 2026-05-15 between the Seller and the Buyer in relation to the Company.

References to statutes are to those statutes as amended, extended, re-enacted or replaced from time to time, and include any statutory instrument or regulation made under them. Headings are for convenience only and do not affect interpretation.

Subject to the provisions of this Deed, the Seller covenants with the Buyer to pay to the Buyer, on a pound-for-pound basis, an amount equal to:

(a) any Tax Liability of the Company arising in respect of, by reference to or in consequence of:
    (i) any income, profits or gains earned, accrued or received on or before Completion; or
    (ii) any Event occurring on or before Completion;
(b) any Tax Liability of the Company arising in respect of any inter-company indebtedness, debt forgiveness or transfer pricing adjustment relating to a period or Event ending on or before Completion;
(c) any reasonable costs and expenses properly incurred by the Buyer or any member of the Buyer's Group (including the Company) in connection with: (i) any Tax Liability for which the Seller is liable under this Deed; or (ii) any successful claim under this Deed.

The covenant in this Clause 2 is given on a pound-for-pound basis. The Buyer is not required to prove that it has suffered loss; it is sufficient to show that there is a Tax Liability falling within this Clause 2. The Seller shall not be entitled to plead general mitigation against any claim under this Clause 2 (save to the extent specifically set out in Clause 7).

3.1 Disguised Remuneration (Part 7A ITEPA 2003). The Seller covenants to pay to the Buyer an amount equal to any Tax Liability of the Company arising under Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (relevant steps and disguised remuneration) where the relevant step occurs after Completion in consequence of arrangements entered into on or before Completion (including, for the avoidance of doubt, employee benefit trusts, FURBS, EFRBS, contractor loan schemes and any pre-arranged scheme involving a third party).

3.2 Employment-Related Securities (Part 7 ITEPA 2003). The Seller covenants to pay an amount equal to any Tax Liability arising under Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (including section 222 grossing-up where the Company fails to recover from the employee within 90 days) in respect of: (a) any pre-Completion grant, award, vesting, exercise or release of employment-related securities; (b) the exercise after Completion of any option granted under an EMI scheme, unapproved option scheme or any other option scheme established on or before Completion; or (c) any restricted-securities chargeable event triggered after Completion by reference to pre-Completion grants.

3.3 Group Relief. The Seller covenants to pay an amount equal to any Tax Liability arising from the unwinding, adjustment, denial or recapture of any surrender or claim of group relief under Part 5 of the Corporation Tax Act 2010, or any other intra-group Tax position adopted for accounting periods ending on or before Completion (including consortium relief, group payment arrangements, and any allocation of losses, capital allowances or controlled foreign company charges).

3.4 Transfer Pricing. The Seller covenants to pay an amount equal to any Tax Liability arising under Part 4 of the Taxation (International and Other Provisions) Act 2010 (transfer pricing), or under the Unassessed Transfer Pricing Profits charge in force for accounting periods beginning on or after 1 January 2026 (at the corporation tax rate plus 6%), in respect of transactions, provisions or arrangements made or imposed on or before Completion.

3.5 Stamp Duty and SDRT. The Seller covenants to pay an amount equal to any Tax Liability of the Company for stamp duty under the Stamp Act 1891 or stamp duty reserve tax under Part IV of the Finance Act 1986 on transactions in securities entered into on or before Completion (excluding, for the avoidance of doubt, any stamp duty chargeable on the transaction effected by the SPA itself, which is borne in accordance with that agreement).

3.6 Stamp Duty Land Tax. The Seller covenants to pay an amount equal to any Tax Liability of the Company for SDLT under the Finance Act 2003 in respect of land transactions effected on or before Completion (including the clawback of any group relief, charity relief or reconstruction relief previously claimed in respect of pre-Completion transactions).

3.7 VAT and TOGC. The Seller covenants to pay an amount equal to any Tax Liability of the Company for value added tax under the Value Added Tax Act 1994 in respect of supplies made or received on or before Completion, and any VAT chargeable as a consequence of the failure of any pre-Completion transfer to qualify as a transfer of a going concern under section 49 of that Act or Article 5 of the Value Added Tax (Special Provisions) Order 1995.

3.8 PAYE and National Insurance. The Seller covenants to pay an amount equal to any Tax Liability of the Company for PAYE income tax under Part 11 of the Income Tax (Earnings and Pensions) Act 2003 and primary and secondary Class 1 National Insurance Contributions under the Social Security Contributions and Benefits Act 1992 in respect of remuneration paid, deemed paid or treated as paid on or before Completion.

3.9 Corporate Criminal Offence (Failure to Prevent Tax Evasion Facilitation). The Seller covenants to pay an amount equal to any Tax Liability, fine, penalty or other financial sanction of the Company under Part 3 of the Criminal Finances Act 2017 (failure to prevent facilitation of UK or foreign tax evasion) arising from any act or omission of an associated person of the Company occurring on or before Completion. The Seller warrants that, to the best of its knowledge, the Company has maintained reasonable prevention procedures under section 45(2) of that Act throughout its ownership of the Company.

The Seller's liability under Clauses 2 and 3 shall be excluded to the extent that the Tax Liability:

(a) was specifically provided for or reserved in the Accounts;
(b) arises from any voluntary act, transaction or omission of the Buyer or the Company after Completion which is outside the ordinary course of business of the Company as carried on at Completion and which the Buyer knew, or ought reasonably to have known, would give rise to a Tax Liability;
(c) results from a change in law, regulation or published HMRC practice (including a change in the official rate of interest, exchange rates, or the corporation tax rate) made after Completion with retroactive effect;
(d) is satisfied or capable of being satisfied by the use or set-off of any Relief available to the Buyer's Group (other than a Relief arising as a direct consequence of the matter giving rise to the Tax Liability);
(e) Liabilities arising from the legacy RandD tax credit claims for accounting periods ending 31 March 2022 and 31 March 2023, which have been separately disclosed and provisioned;
(f) arises from a tax liability that the Buyer agrees in writing to assume; or
(g) arises from any failure by the Buyer to comply with its obligations under Clauses 6 (Conduct of Tax Affairs), 8 (Buyer Notice Mechanics) or any other procedural obligation in this Deed, where that failure has materially prejudiced the Seller.

Disclosure carve-back. For the avoidance of doubt, and notwithstanding any disclosure made against any tax warranty in the SPA or any disclosure letter, no disclosure shall reduce, qualify or extinguish the Seller's liability under this Deed. The covenant in this Deed is a strict indemnity and is given on its own terms.

5.1 General time limit. Subject to Clause 5.2, the Seller shall have no liability under this Deed in respect of any Tax Liability unless the Buyer has given written notice to the Seller, setting out reasonable details of the Tax Liability, on or before the 7th anniversary of Completion. Any claim so notified shall be deemed withdrawn unless legal proceedings have been issued and served within twelve (12) months of the date of notification.

5.2 No limit for fraud or deliberate default. Clause 5.1 shall not apply to any Tax Liability arising from any fraud, fraudulent misrepresentation, deliberate concealment or wilful default by the Seller, the Company or any director, officer or employee of either of them prior to Completion. The Seller's liability in such cases shall be unlimited in time, in line with HMRC's 20-year discovery window under paragraph 46 of Schedule 18 to the Finance Act 1998 and the principles in section 32 of the Limitation Act 1980.

The Seller's aggregate liability under this Deed shall not exceed the aggregate Consideration paid by the Buyer under the SPA, together with the reasonable costs and expenses of the Buyer incurred in pursuing a successful claim. No de minimis threshold or basket applies — every Tax Liability falling within Clauses 2 or 3 (and not excluded under Clause 4) is recoverable in full from the first pound, subject only to the cap in this Clause and the time limits in Clause 5.

If any sum payable by the Seller to the Buyer under this Deed is or will be subject to Tax in the hands of the Buyer (or would have been subject to Tax but for the use of any Relief), the Seller shall pay such additional amount as is necessary to ensure that the net amount received and retained by the Buyer, after that Tax (or notional Tax), equals the sum that would have been received had no Tax been payable. The parties intend that all payments under this Deed be treated, so far as possible, as adjustments to the consideration paid under the SPA and not as taxable receipts in the hands of the Buyer.

8.1 Joint conduct (Buyer-administered). Subject to this Clause 8, the Buyer shall, after Completion, have day-to-day conduct of the Tax affairs of the Company, including the routine preparation and filing of returns. However, in respect of any Material Tax Matter — being any matter relating to a pre-Completion period where the Tax Liability in dispute exceeds £25,000, or which involves a contentious enquiry by HMRC, or which would have a material precedent effect on the Buyer's Group — the Buyer shall (a) notify the Seller promptly, (b) provide the Seller with copies of all relevant correspondence, and (c) not concede, settle or admit liability without the Seller's prior written consent (not to be unreasonably withheld or delayed).

8.2 Seller right to take over conduct. The Seller may, by written notice to the Buyer, elect to take over the conduct of any specific Tax Claim relating to a pre-Completion period, provided that the Seller (a) first indemnifies the Buyer and the Company to the Buyer's reasonable satisfaction against all costs, penalties and interest arising from the conduct, and (b) acts in good faith, with reasonable diligence and on the basis of advice from reputable tax counsel. The Buyer shall procure that the Company gives the Seller and its advisers all reasonable cooperation in such conduct.

8.3 Settlement. No admission of liability to, no agreement with, and no compromise or settlement of any pre-Completion Tax Claim with any Tax Authority shall be made by the Buyer or the Company without the Seller's prior written consent (not to be unreasonably withheld or delayed). Consent shall be deemed given if not refused, with detailed reasons, within ten (10) Business Days of a written request.

8.4 Cooperation. The Buyer shall procure that the Company gives the Seller and its professional advisers all reasonable cooperation in relation to pre-Completion Tax matters, including providing copies of records, signing returns prepared by the Seller, attending HMRC interviews on reasonable notice and making employees and officers available for consultation.

8.5 Cost indemnity. The Seller shall indemnify the Buyer and the Company on demand against all reasonable out-of-pocket costs (including adviser fees and a proportionate charge for employee time) incurred in complying with this Clause 8.

9.1 Overprovision. If, on or before the date falling seven (7) years after Completion, the auditors of the Company (acting reasonably and as experts) certify that the Accounts contained an overprovision in respect of Tax that gave rise (in whole or in part) to a successful claim under this Deed, the amount of the overprovision attributable to that claim shall first be set off against any payment then due from the Seller, and any excess shall be repaid by the Buyer to the Seller within thirty (30) days of certification.

9.2 Third-party recovery. If the Buyer or the Company recovers from any person (other than the Seller, but including any insurer, Tax Authority refund, or third-party indemnifier) any amount that relates to a Tax Liability already paid by the Seller under this Deed, the Buyer shall, within thirty (30) days of receipt, pay to the Seller an amount equal to the recovery, net of (a) the reasonable costs of recovery, (b) any Tax suffered on the recovery, and (c) any other reasonable expenses properly incurred in connection with the recovery.

9.3 Corresponding savings. If a Tax Liability for which the Seller has made a payment under this Deed gives rise to a corresponding tax saving for the Buyer or any member of the Buyer's Group (including, without limitation, additional loss relief, additional capital allowances or an increased base cost), the value of that saving (computed at the relevant corporation tax rate applicable at the time the saving is utilised — currently 25% main rate or 19% small-profits rate under Finance Act 2024) shall first be set off against any payment then due from the Seller, and any excess shall be repaid by the Buyer to the Seller within thirty (30) days of the saving being utilised.

9.4 Set-off against SPA retention. The Buyer may set off any amount finally determined or admitted to be payable by the Seller under this Deed against the Retention Amount (or escrow / completion holdback) held under the SPA. Such set-off shall be without prejudice to the Buyer's right of recovery for any excess.

9.5 Reasonable mitigation. The Buyer shall procure that the Company takes reasonable steps to mitigate any Tax Liability under this Deed, but is under no obligation to incur unreasonable cost or to take steps that materially prejudice the Buyer's commercial interests.

10.1 Notification. The Buyer shall give written notice to the Seller, setting out reasonable particulars, of any Tax Claim likely to give rise to a claim under this Deed within 21 Business Days of becoming aware of it. Failure to notify within that period shall not bar the claim but shall be taken into account in assessing any prejudice suffered by the Seller.

10.2 Payment. Sums payable by the Seller under this Deed shall be paid in cleared funds no later than five (5) Business Days before the date on which the Tax Liability is due and payable to the relevant Tax Authority by the Company (or, if later, ten (10) Business Days after the Buyer's written demand setting out the amount claimed and the basis of the claim).

10.3 Late payment interest. Any amount payable by the Seller under this Deed and not paid by the due date shall bear interest from the due date until actual payment at the Bank of England base rate plus 4% per annum, accruing daily and compounded monthly.

10.4 Buyer right to retake conduct. The Buyer may retake conduct of any Tax Claim previously taken over by the Seller under Clause 8.2 only on the Seller's material default — including failure to defend the claim with reasonable diligence, breach of any settlement consent obligation, or insolvency of the Seller.

10.5 Confidentiality. Each party shall keep confidential, and shall procure that its professional advisers keep confidential, all Tax records, returns, computations and correspondence disclosed or generated in connection with this Deed, save (a) for disclosure to professional advisers under a duty of confidentiality, (b) where compelled by law, court order or Tax Authority demand, or (c) with the prior written consent of the other party. This obligation shall survive termination and shall continue for six (6) years after the last claim under this Deed is determined.

10.6 Tax Expert. Any dispute as to the existence, quantum or computation of a Tax Liability under this Deed shall be referred to an independent Tax Expert (a Chartered Tax Adviser or partner of a top-20 UK accountancy firm) jointly appointed by the parties (or, failing agreement, nominated by the President of the Chartered Institute of Taxation). The Tax Expert shall act as expert and not as arbitrator; the determination shall be final and binding save in the case of manifest error or fraud. The Tax Expert's costs shall be borne as the Tax Expert determines.

11.1 WandI insurance (partial). The Buyer has procured a Warranty and Indemnity insurance policy that, subject to its terms, covers liability under this Deed up to the policy sub-limit specified in the policy schedule. Liability above the sub-limit (or otherwise excluded from the policy) remains with the Seller subject to the cap in Clause 6.

11.2 Recourse order. The Buyer shall pursue recovery first against the WandI insurer and shall only have recourse to the Seller in respect of (a) the policy excess, (b) matters expressly excluded from the policy, (c) claims above the policy limit, or (d) fraud by the Seller.

11.3 Subrogation. The Buyer shall procure that the WandI insurer waives its rights of subrogation against the Seller in respect of any claim paid under the policy, save for any claim arising from the Seller's fraud or fraudulent misrepresentation (in respect of which subrogation rights are preserved).

12.1 Counterparts. This Deed may be executed in any number of counterparts, each of which when executed shall constitute an original, and all counterparts together shall constitute one and the same deed.

12.2 Electronic execution. The parties agree that this Deed may be executed by qualified electronic signature in accordance with section 7 of the Electronic Communications Act 2000, the eIDAS regime as retained in UK law, and the Law Commission's 2019 statement on Electronic Execution of Documents. Each party warrants that its signatory has the authority to execute this Deed electronically on its behalf.

12.3 Notices. Any notice or other communication under this Deed shall be in writing and shall be delivered by hand, by first-class pre-paid post or by email to the addresses set out above (or such other address as a party may notify in writing). Notices delivered by hand are deemed received on delivery; by first-class post on the second Business Day after posting; by email on the next Business Day after transmission (subject to no bounce-back).

12.4 Third-party rights. A person who is not a party to this Deed has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term, save that any member of the Buyer's Group (including the Company) may enforce the Seller's covenants under Clauses 2, 3 and 7 in its own name. The consent of any such third party is not required to vary or rescind this Deed.

This Deed and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it shall be governed by and construed in accordance with the law of England and Wales. The parties irrevocably submit to the exclusive jurisdiction of the courts of England and Wales.

Entire agreement. This Deed (together with the SPA, any tax warranties and any disclosure letter executed in connection with it) constitutes the entire agreement between the parties in relation to its subject matter and supersedes all prior drafts, term sheets and understandings. No variation shall be effective unless in writing and signed (as a deed) by or on behalf of each party.

Severability. If any provision of this Deed is held invalid or unenforceable by a court of competent jurisdiction, the provision shall be modified to the minimum extent necessary to render it enforceable, and the remainder of this Deed shall continue in full force in line with the blue-pencil principles in Tillman v Egon Zehnder Ltd [2019] UKSC 32.

This Deed has been executed and delivered as a deed on the date written at the head of it at London.

Seller execution. Signed as a deed by two directors.
Buyer execution. Signed as a deed by two directors.

Each party intends to deliver this Deed on the date first written above and acknowledges that delivery shall be deemed to have occurred on that date.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.