On the face of it, transactions backed by warranty and indemnity (W&I) insurance are helpful for both a buyer and a seller. The seller’s liability is capped, often at just £1, and the buyer is covered for many risks by the insurance policy. However, in the context of tax risks, a standard W&I policy may not be as useful to a buyer as is first thought. W&I policies contain many exclusions, meaning that a buyer is often left with a choice of seeking cover from the seller outside of the £1 cap, taking out a specific insurance policy or even worse, accepting they have no protection at all for certain tax risks. As a result, a buyer should not automatically assume a W&I-backed tax deed is appropriate for its transaction.
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On the face of it, transactions backed by warranty and indemnity (W&I) insurance are helpful for both a buyer and a seller. The seller’s liability is capped, often at just £1, and the buyer is covered for many risks by the insurance policy. However, in the context of tax risks, a standard W&I policy may not be as useful to a buyer as is first thought. W&I policies contain many exclusions, meaning that a buyer is often left with a choice of seeking cover from the seller outside of the £1 cap, taking out a specific insurance policy or even worse, accepting they have no protection at all for certain tax risks. As a result, a buyer should not automatically assume a W&I-backed tax deed is appropriate for its transaction.
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
.jpg?sfvrsn=335a554c_0 "300 x 250 (MPU)")