What If You’re Considering a Merger? Tax and Legal Implications You Need to Know

Why Merging in 2025 Is Riskier Than It Looks

Merging two businesses may sound like a growth move, but in 2025, it is also a compliance minefield.

From Capital Gains Tax (CGT) on share transfers to VAT liabilities, TUPE obligations, and loss of tax reliefs, the financial and legal implications of a merger are far-reaching. HMRC’s updated guidance confirms that how a merger is structured, whether as a share purchase, asset transfer, or joint venture, directly affects your tax exposure.

And that is before you even start integrating systems, aligning accounting policies, or managing cultural fit.

If you are considering a merger, the earlier you involve your accountant, the better.

What We See in Real-World SME Mergers

We regularly advise SME owners who are exploring mergers, often with trusted partners or competitors. They are optimistic, but unsure about the detail:

• “Will this trigger a tax bill?”
• “Can we keep our existing VAT registration?”
• “What happens to our staff contracts?”
• “How do we merge our accounting systems?”

These are not just technical questions. They are strategic ones. And without proper planning, even well-matched mergers can lead to:

• Unexpected tax liabilities
• Loss of reliefs or allowances
• Compliance breaches
• Operational disruption

That is why we always say: do not just merge, merge wisely.

The Tax and Legal Watchpoints You Must Address

Here is what we help clients assess before any merger goes ahead:

Capital Gains Tax (CGT) and Stamp Duty

If shares or assets are transferred, CGT may apply, especially if the merger involves a partial exit. Stamp Duty may also be triggered on share purchases.

We help you:

• Assess CGT and Stamp Duty exposure
• Structure the deal to minimise tax
• Explore eligibility for Business Asset Disposal Relief

TUPE and Employment Law

Under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), staff contracts may automatically transfer, but only if the merger is structured as a business transfer.

We can help you align payroll and pensions post-merger.

VAT and Indirect Taxes

Mergers can affect VAT registration, input tax recovery, and liability for historic VAT errors.

We help you:

• Review VAT status and obligations
• Ensure continuity or re-registration
• Avoid compliance gaps

Tax Losses and Reliefs

If one business has carried-forward tax losses, merging may restrict or eliminate their use, especially if there is a change in ownership or business activity.

We help you:

• Assess loss utilisation rules
• Preserve reliefs where possible
• Document continuity for HMRC

Financial Systems and Reporting Integration

Post-merger, you need to harmonise accounting policies, consolidate systems, and align reporting structures.

We help you:

• Merge ERP and finance platforms
• Standardise accounting treatments
• Ensure regulatory compliance

What a Wright Vigar Supported Merger Looks Like

Imagine this:

You merge with a strategic partner. The deal is tax-efficient. Staff are protected. Financial systems are aligned. And your new entity is stronger, leaner, and ready to grow.

That is what happens when you involve your accountant early, not just at the end.

At Wright Vigar, we help clients:

• Structure mergers to minimise tax
• Navigate TUPE, VAT and CGT
• Align financial systems and reporting
• Conduct full tax and legal due diligence
• Plan post-merger integration

Let’s Make Your Merger Work

Thinking about joining forces with another business? Let us help you protect your interests, financially, legally, and operationally.