UK US Tax Due Diligence: Ensuring Acquisition Success

Introduction

Acquiring a business across borders carries inherent financial and regulatory risks. For UK–US transactions, UK-US tax due diligence serves as the critical first step to safeguard your investment. It identifies potential tax liabilities, uncovers hidden risks, and ensures compliance with both HMRC and IRS regulations.

This guide targets business owners, CFOs, and investors planning UK–US acquisitions who require a structured approach to minimise financial exposure. Implementing comprehensive tax due diligence protects against unexpected costs and enhances post-acquisition profitability.

Understanding UK–US Tax Due Diligence

What It Entails

UK US tax due diligence involves an in-depth review of the target company’s tax position, including corporate tax, VAT/sales tax, employee-related taxes, and cross-border transfer pricing. Analysts assess historical filings, identify potential exposures, and evaluate deferred liabilities.

Why It Matters

Without robust due diligence, businesses risk inheriting undisclosed liabilities, penalties, or misaligned financial strategies. Proper tax planning ensures compliance, facilitates smoother post-acquisition integration, and aligns with strategic growth objectives.

• HMRC – UK tax authority guidance
• IRS – US tax authority guidance
• OECD Transfer Pricing Guidelines – International cross-border tax rules

Key Components of Due Diligence

1. Corporate Tax Analysis

Analysing corporate tax history ensures the target company has paid all required taxes. Key focus areas include:

• Past corporate tax returns in both jurisdictions
• Deferred tax liabilities
• Potential disputes with HMRC or IRS

External authority links:

• ICAEW Corporate Tax Guidance
• Companies House filings

2. Employee-Related Taxes

Review payroll taxes, social security contributions, and expatriate arrangements. Mismanaged employment taxes can create substantial post-acquisition liabilities.

• UK PAYE and National Insurance
• US Social Security and Medicare

3. VAT and Sales Tax Compliance

Check historical VAT or sales tax filings, reclaimable credits, and potential exposure from unreported transactions.

• HMRC VAT guidance
• IRS Sales Tax Resources

4. Transfer Pricing and Cross-Border Transactions

Evaluate intercompany pricing, royalties, and profit allocation between the UK and US entities. Ensure alignment with OECD guidelines.

• OECD Transfer Pricing
• UK HMRC Transfer Pricing Guidance

5. Historical Tax Disputes

Assess any ongoing or historical tax investigations. Unresolved disputes can present significant financial risk.

• Financial Reporting Council – UK accounting oversight
• US Federal Reserve – corporate oversight

Strategic Benefits of Proper Due Diligence

1. Risk Mitigation: Identifies hidden liabilities early.
2. Optimised Structuring: Enables tax-efficient acquisition planning.
3. Regulatory Compliance: Minimises fines and penalties.
4. Enhanced Negotiation Leverage: Supports price adjustment for tax exposures.
5. Integration Readiness: Facilitates seamless post-acquisition financial operations.

Common Pitfalls to Avoid

• Overlooking historical tax claims
• Ignoring VAT or sales tax issues
• Failing to assess employee-related liabilities
• Neglecting transfer pricing adjustments
• Skipping cross-border regulatory checks

How JungleTax Supports UK–US Acquisitions

JungleTax offers expert guidance in UK-US tax due diligence, providing:

• Comprehensive financial and tax reviews
• Risk identification and mitigation
• Cross-border compliance expertise
• Advisory on acquisition structuring for tax efficiency

We work alongside CFOs, directors, and investors to ensure acquisitions proceed without costly surprises.

Conclusion

Conducting thorough UK-US tax due diligence is non-negotiable for cross-border acquisitions. It safeguards investments, ensures regulatory compliance, and optimises post-acquisition operations. By partnering with JungleTax, businesses gain expert oversight and actionable insights to drive successful UK–US transactions.

Call to Action:
For tailored support on UK–US acquisitions and tax due diligence, contact JungleTax at hello@jungletax.co.uk or call 0333 880 7974 today.