Contract
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1 EXECUTION VERSION Tax Deed PPL WPD Limited and National Grid Holdings One Plc 2021 9 June Exhibit 2.1
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3 (b) any Relief to the extent that the same arises in the ordinary course of business of the Company in respect of periods (or parts thereof) commencing on or after the Accounts Date and ended on the Completion Date; and/or (c) any Relief to the extent that the same arises as a consequence of or by reference to a Relevant Event occurring after Completion or in respect of periods (or parts thereof) commencing on or after the Completion Date; and/or (d) any Relief arising to any member of the Buyer’s Group (but excluding, for the avoidance of doubt, any of the Group Companies); "Claim for Tax" means: (a) any claim, assessment, demand, notice, determination or other document issued or action taken by or on behalf of any Taxation Authority or any other person by virtue of which the Company is or may have a Tax Liability; and/or (b) any self-assessment made by the Company in respect of any Tax Liability which it considers that it is or may become liable to pay, in either case where it appears that the Buyer could bring a Tax Claim in respect of the relevant Tax Liability; "Company" means each Group Company; "Covenantor's Group" means the Seller, its group undertakings (excluding the Company) and all of them and each of them from time to time as the context admits and "member of the Covenantor’s Group" shall be construed accordingly; "Deemed Tax Liability" means: (a) the loss, non-availability or reduction of any Accounts Relief, in which case the amount of the Deemed Tax Liability shall be the amount of Tax paid by the Company which would not have been paid but for such loss, non-availability or reduction; or (b) the utilisation or set-off of a Buyer's Relief available (or made available) to the Company against any Actual Tax Liability or against any income, profits or gains where, but for such setting off, the Buyer would have been entitled to make a claim under this deed, in which case the amount of the Deemed Tax Liability shall be equal to the amount which would have been payable by the Company but for the utilisation or set-off of that Buyer's Relief; "Finally Determined" means a Tax Claim which: (a) has been resolved by written agreement between the Covenantor and the Buyer; or (b) which is the subject of an order as to both liability and quantum made by a court or tribunal of competent jurisdiction or arbitration where either no right of appeal lies or the parties are debarred (whether by the passage of time or otherwise); "Group Relief" means any of the following: (a) relief surrendered or claimed pursuant to Part 5 or Part 5A of the CTA 2010; (b) a tax refund relating to an accounting period capable of being claimed or surrendered pursuant to section 963 of the CTA 2010; or
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4 (c) the notional transfer of an asset or reallocation of a gain or loss pursuant to section 171A of the TCGA 1992 and the notional reallocation of gain pursuant to section 792 of the CTA 2009; (d) any other Relief available between members of a group for Tax purposes; "HMRC" means Her Majesty's Revenue and Customs; "HMRC Enquiry" means: (a) the enquiries of HMRC into the corporation tax returns of PPL UK Resources Ltd in respect of the accounting periods ended 31 March 2017 and 31 March 2018 (and any subsequent accounting periods commencing before the Completion Date) relating to the deduction of interest on intragroup loans from non-UK resident companies; and (b) any enquires of HMRC in respect of the same or similar subject matter, including for the avoidance of doubt any enquiry into any matters relevant to any Anti-hybrid Tax Liability or into the corporation tax returns of the Company in respect of any surrender of Group Relief to the Company by PPL UK Resources Ltd; "income, profits or gains" includes any other measure by reference to which Tax is computed; "Instalment" means any payment which is or becomes due and payable by the Company in accordance with Instalment Payments Regulations; "Instalment Payments Regulations" means the Corporation Tax (Instalment Payments) Regulations 1998 (No. 3175); "Relevant Companies" has the meaning given to it in clause 11; "Relevant Event" means every event, arrangement, circumstance, act, omission, or transaction (including the entry into and completion of the Sale Agreement) done or omitted to be done by the Covenantor or the Company or which in any way concerns or affects the Company whether or not done or omitted to be done by the Company or the Covenantor ; "Relief" means any loss, allowance, credit, exemption, deduction, set-off or relief from, in computing against or in respect of Tax or any right to the repayment of Tax; "Tax Liability" means either an Actual Tax Liability or a Deemed Tax Liability; "taxation statutes" means all statutes, statutory instruments, decrees, orders, enactments, laws, by-laws, directives and regulations, whether domestic or foreign, providing for or imposing any Tax, and shall include any relevant predecessor legislation where that legislation was on substantially the same terms; 1.3 Subject to clause 1.4, any reference to income, profits or gains earned, accrued or received on or before a particular date or in respect of a particular period shall include income, profits or gains deemed, treated or regarded to have been earned, accrued or received on or before that date or in respect of that period for the purposes of any Taxation. 1.4 For the purposes of this deed, and in particular for determining to what extent any liability for Tax arises in respect of or by reference to any income, profits or gains earned, accrued or received on or before Completion or otherwise relates to the period ending on the date of Completion, the date of Completion shall be deemed to be an actual accounting date of the Company for the purposes of Part 2 Chapter 2 of the CTA 2009 (or its equivalent in any other jurisdiction) and without prejudice to the generality of the foregoing:
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6 (d) it arises in consequence of any act, omission or transaction of the Company and/or a member of the Buyer's Group after Completion which the Company or the relevant member of the Buyer’s Group knew (or ought to have known) would give rise to such Tax Liability but excluding any act, omission or transaction: (i) carried out pursuant to a legally binding obligation of the Company incurred prior to Completion; or (ii) pursuant to an obligation imposed by any law, regulation or requirement having the force of law; or (iii) taking place at the written request of the Covenantor or in accordance with the terms of the Sales Agreement or this deed; or (iv) occurring in the ordinary and proper course of the business of the Company as at present carried on; (e) it arises as a result of or by reference to income, profits or gains actually earned or received by or actually accrued to the Company on or before the Accounts Date and not reflected in the Accounts provided that the benefit of such income, profit or gain is retained by the Company at Completion or has been expended by the Company in the ordinary course of its business since the Accounts Date; (f) it arises or is increased as a result of any failure by the Buyer to comply with its obligations under this deed or the Sale Agreement; (g) it would not have arisen but for the passing of or any change in, after Completion, any law, rule, regulation, published interpretation of the law or published administrative practice of any government, governmental department, agency or regulatory body or an increase in the rate of Tax or any imposition of Tax not actually or prospectively in force at Completion or any withdrawal of any extra-statutory concession after Completion; (h) it comprises interest or penalties arising by virtue of any underpayment of Tax prior to Completion under the Instalment Payments Regulations insofar as any such underpayment would not have been an underpayment but for a Relevant Event occurring after Completion; (i) it would not have arisen but for: (i) any claim, election, surrender or disclaimer made, or notice or consent given, or any other thing done after the date of Completion (other than one the making, giving or doing of which was taken into account in computing any provision or reserve for Tax in the Accounts) under or in connection with the provisions of any taxation statutes by the Buyer, the Company or any member of the Buyer's Group; or (ii) the failure or omission by the Company to make any claim, election, surrender or disclaimer, or give any notice or consent or do any other thing the making, giving or doing of which was taken into account in computing any provision or reserve for Tax in the Accounts; (j) it would not have arisen but for some act, omission, transaction or arrangement carried out at the written request or with the written approval of the Buyer prior to Completion or which was expressly authorised by the Sale Agreement; (k) it comprises interest or penalties attributable to the unreasonable delay or default of the Buyer or the Company after the Completion Date;
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7 (l) any Relief (other than a Buyer's Relief but including the surrender to the Company of any Reliefs or losses by the Covenantor or any member of the Covenantor's Group at no cost to the Company) is available to the Company to set against or otherwise mitigate the Tax Liability in question or would be available on the making of an appropriate claim; (m) it arises as a result of any change after Completion in any accounting policy (including the length of any accounting period for Tax purposes), any Tax or accounting basis or practice of the Company, in all cases provided that the change was not in order to ensure compliance with any obligation imposed by any law, regulation or requirement having the force of law on or prior to Completion; (n) it would not have arisen but for a cessation of or any major change in the nature or conduct of any trade carried on by the Company being a cessation or major change occurring on or after Completion; (o) the Company has satisfied such Tax Liability by receiving cash from a person or persons other than the Buyer or any member of the Buyer's Group (but excluding, for the avoidance of doubt, any of the Group Companies); (p) an amount in respect of such Tax Liability is recoverable by the Buyer's Group under any policy of insurance or would have been so recoverable but for any change in the scope or terms of insurance since the date of the Sale Agreement; (q) the liability concerned comprises a Permitted Leakage Payment; (r) any amount in respect of such Tax Liability has been recovered under the Seller Warranties or otherwise under the Sale Agreement or this deed (or in either case would have been so recovered but for a threshold or de minimis provision limiting liability) or the Covenantor's Group has made payment in respect of such Tax Liability pursuant to Part 14 Chapter 6 of the CTA 2010 or any other provision in the United Kingdom or elsewhere imposing liability on the Covenantor or any member of the Covenantor's Group for Tax primarily chargeable against the Company; or (s) the liability of the Covenantor in respect thereof is limited or restricted pursuant to the provisions of Schedule 2 (Limitations on Seller Liability) of the Sale Agreement where those provisions are expressly stated to apply to Tax Claims. 2.3 Any payment made under this deed between the parties (including in particular any payments made pursuant to clause 2.1 hereof by the Covenantor to the Buyer) shall be treated as an adjustment to the consideration paid by the Buyer under the Sale Agreement for the shares of the Company. 3. TIMING Where the Covenantor becomes liable to make any payment pursuant to clause 2, the due date for the making of that payment shall be the later of seven days after the date of demand therefor and: (a) insofar as the claim relates to an Actual Tax Liability, three days before the last day on which a payment of that Tax may be made by the Company without incurring any liability to interest and/or penalties; (b) insofar as the claim arises in respect of a Deemed Tax Liability: (i) which relates to the loss, non-availability or reduction of a repayment of Tax, three days before the day on which such repayment (or increased repayment) of Tax would have been due;
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9 shall provide, or procure that the Company provides, any information or assistance reasonably required for the purpose of production by the auditors of a certificate to that effect. 5.2 If any liability contingency or provision in the Accounts has proved to be an overprovision, then the amount of such overprovision shall be dealt with in accordance with clause 5.3. 5.3 Where it is provided under clause 5.2 that any amount is to be dealt with in accordance with this clause 5.3: (a) the amount of the overprovision shall first be set against any payment then due from the Covenantor under this deed or under the Tax Warranties; (b) to the extent there is an excess, a refund shall be made to the Covenantor of any previous payment or payments made by the Covenantor under this deed or under the Tax Warranties (and not previously refunded) up to the amount of the excess; and (c) to the extent that the excess referred to in clause 5.3(b) is not exhausted under that clause, the remainder of that excess shall be carried forward and set against any future payment or payments which become due from the Covenantor to the Buyer under this deed or under the Tax Warranties. 5.4 For the purposes of this clause an overprovision exists if (applying the accounting policies, principles and practices adopted in relation to the preparation of the Accounts): (a) any liability in respect of Tax (including any liability in respect of deferred Tax) has been overstated in the Accounts, or such liability has been discharged or satisfied below the amount attributed thereto in the Accounts; or (b) any contingency or provision in respect of Tax in the Accounts proves to be overstated. 5.5 Clause 5.2 shall not apply if and to the extent that the relevant overprovision arises or is increased as a result of: (a) the availability of a Buyer’s Relief; (b) the availability of a Relief which has already been taken into account in reducing the Covenantor’s liability under this deed or the Sale Agreement or which has already given rise to a set-off against a payment due from the Covenantor under this deed or the Sale Agreement or to a payment by the Buyer to the Covenantor under this deed or the Sale Agreement; or (c) the availability of any Relief which has been taken into account for the purposes of the Insurance Policy by reducing the amount payable to the Buyer or is required to be paid by the Buyer thereunder. 5.6 Any rights of the Covenantor under this clause 5 shall expire on the date which is seven years after the date of Completion unless notice of a Tax Claim has been received by the Seller prior to that date and any such Tax Claim is still outstanding as at that date, in which event the rights of the Covenantor under this clause 5 shall expire on the date which is six months after all such Tax Claims which were so outstanding have been Finally Determined. 6. REFUNDS 6.1 The Buyer shall promptly notify the Covenantor of any repayment or right to a repayment of Tax which the Company is or becomes entitled to or receives in respect of a Relevant Event occurring prior to the Accounts Date or in respect of any period (or part of any period)
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12 So far as possible, the Covenantor and the Buyer shall respectively afford (or procure to be afforded) to the other or its duly authorised agents such information and assistance as may reasonably be required to prepare, submit and agree such Tax Returns, including for the avoidance of doubt that at the request of the Buyer the Covenantor shall cause such Tax Returns of the Retained Companies to be authorised, signed and returned to the Buyer or the Company or its duly authorised agent for submission to the appropriate Taxation Authority without undue or unreasonable delay. 8.2 The Buyer or its duly authorised agents shall (subject to clause 8.3) be responsible for and have the conduct of preparing, submitting and agreeing the Tax Returns of the Company and the Retained Companies for the accounting period in which Completion takes place subject to such Tax Returns being submitted in draft form to the Covenantor or its duly authorised agent for comment 45 days before the same is due to be sent to the relevant Taxation Authority. All such Tax Returns shall be prepared, so far as possible, on a basis consistent with previous practice. The Covenantor or its agent shall comment within 21 days of such submission and if the Buyer has not received comments within that period, the Covenantor or its agents shall be deemed to have approved such draft Tax Returns. If the Covenantor or its agents have any comments or suggestions, the Buyer or its agents shall not unreasonably refuse to adopt such comments or suggestions provided always that: (a) in the case of any comments or suggestions that relate to a Tax Return of a Company, such comments or suggestions are reasonable and relate to any matter which could give rise to or increase the amount of an Anti-hybrid Tax Indemnity Claim; and (b) nothing herein shall oblige the Buyer to submit any computation or other document unless the Buyer is satisfied that the same is accurate and complete in all material respects. So far as possible, the Covenantor and the Buyer shall respectively afford (or procure to be afforded) to the other or its duly authorised agents such information and assistance as may reasonably be required to prepare, submit and agree such Tax Return, including for the avoidance of doubt that at the request of the Buyer the Covenantor shall cause such Tax Returns of the Retained Companies to be authorised, signed and returned to the Buyer or the Company or its duly authorised agent for submission to the appropriate Taxation Authority without undue or unreasonable delay. 8.3 The Buyer shall procure that the Company shall cause all such claims, disclaimers, surrenders and elections as may be directed by the Covenantor relating to all accounting periods or part thereof ending on or before the date of Completion (and such other claims, surrenders and elections necessary to mitigate any Tax Liability which has given or would otherwise give rise to a claim under this deed or the Tax Warranties) to be prepared and submitted to the appropriate Taxation Authority without undue or unreasonable delay. 8.4 The Buyer shall procure that no Claim for Tax, Tax Liability, action or issue in respect of which the Covenantor could be required to make a payment under this deed in respect of an Anti-hybrid Tax Indemnity Claim is settled or otherwise compromised without the Covenantor's prior written consent, such consent not to be unreasonably withheld, and the Buyer shall and shall procure that the Company and its advisers do not submit any correspondence or return or send any other document to any Taxation Authority in circumstances where the Buyer or any such person is aware or could reasonably be expected to be aware that the effect of submitting such correspondence or return or sending such document would or could be to put such Taxation Authority on notice of any matter which could give rise to, or could increase, an Anti-hybrid Tax Indemnity Claim without first affording the Covenantor a reasonable opportunity to comment thereon and without taking account of such comments so far as it is reasonable to do so. 8.5 Each of the parties acknowledges that:
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16 been made and/or no such liability to Tax been incurred and, in applying this clause 13, no account shall be taken of the extent to which any liability for Tax may be mitigated or offset by any Relief available to the recipient so that where such Relief is available the additional amount payable hereunder shall be the amount which would have been payable in the absence of such availability. 13.3 If, following the payment of an additional amount under clause 13.2 above, the recipient subsequently obtains a saving, reduction, credit or payment in respect of the deduction or withholding giving rise to such additional amount, the recipient shall pay to the payer a sum equal to an amount which the recipient determines (acting reasonably) will leave it (after that payment) in the same after-Tax position as it would have been in had the further sums paid pursuant to clause 13.2 not been required to be made to the recipient, such payment to be made within seven days of the receipt of the saving, reduction, credit or payment as the case may be. 14. MISCELLANEOUS 14.1 In determining the amount of any recovery, the amount of any Relief or other benefit received by any company or person for the purposes of this deed, any party hereto shall be entitled to require that the auditors of the company or person in question (or if the auditors are unwilling or unable to act such other firm of chartered accountants as may be agreed between the parties or may, in default of agreement, be appointed at the request (and expense) of either party by the President or next available officer of the Institute of Chartered Accountants) shall be instructed to determine the amount in question or whether any earlier determination in respect thereof remains correct in the light of all relevant circumstances including circumstances which have only become known since such earlier determination and the fees of such auditors or accountants shall be paid by such of the parties as the auditors or accountants may themselves determine as being fair and reasonable. Any determination made by the auditors or accountants shall be binding upon the parties who shall make such adjusting payments (if any) as may be required to reflect the same as soon as practicable thereafter. 14.2 The provisions of clauses 22 (Variation), 23 (Waiver), 24 (Invalidity), 25 (Notices), 26 (Counterparts), 27 (Governing Law and Jurisdiction) and 28 (Third Party Rights) and any assignment of the Sale Agreement shall apply to this deed as if the same were incorporated herein mutatis mutandis. For the avoidance of doubt, this deed is subject to the provisions of Schedule 2 (Limitations on Seller Liability) of the Sale Agreement to the extent provided therein. 15. CONDITIONALITY 15.1 Notwithstanding any other clause of this deed, the Covenantor and the Buyer agree that this deed, and all the provisions thereof, shall be conditional upon Completion occurring and no obligation under this deed shall be legally binding unless and until Completion has occurred and the Buyer has satisfied all of its obligations pursuant to clause 6.4 of the Sale Agreement. IN WITNESS whereof this deed has been executed on the date first above written
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