Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Buyout definition

What does Buyout mean? In corporate practice, a buyout is the acquisition of a company or of a controlling interest in its shares, giving the buyer effective control of the target. It is a market term used in M&A and private equity rather than one defined by statute or case law. Common forms are the management buyout (MBO), where existing managers take control (often with private equity funding), and the leveraged buyout (LBO), where a sponsor acquires control using significant third‑party acquisition debt, typically secured on the target group. Other variants include management buy‑in (MBI), secondary buyouts between sponsors, carve‑outs...

UK private equity buyouts (share acquisitions): corporation tax deductibility of deal costs and VAT recovery—rules, case law and practical guidance

Published by a LexisNexis Tax expert

Practice notes

This Practice Note examines the following matters in the context of priVATe equity-backed Buyouts:

the situations in which Costs borne by the Acquisition group in relation to the buyout are allowable as deductions for corporation tax purposes
the extent to which any VAT charged on those costs can be reclaimed by the acquisition group

It is assumed that all companies comprising the acquisition group are UK tax resident and that the buyout is implemented as a purchase of shares in the target company (target). For additional detail on how private equity-backed buyouts are usually structured and financed, and on other tax considerations arising for the acquisition group, see Practice Notes: Tax and management buyouts—what is a management buyout?, Tax and secondary buyouts—what are secondary buyouts? and Tax and buyouts—tax issues for the acquisition group.

Structure of a typical buyout

A simplified post-buyout structure is illustrated below:

Deductibility of deal costs

Companies within the acquisition group will incur a range of transaction outgoings over the course of a buyout. These include professional fees for legal, structuring and financial advice, finance or financing costs, and the expenses of due diligence...

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Web page updated on 21/05/2026

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