This clause allows you to share confidential information with tax authorities like HMRC (in the UK) or the IRS (in the US) when required by tax law. It matters because tax authorities have legal power to demand financial records and information, and you cannot refuse—tax evasion is a crime. This clause protects you from breach-of-contract liability when you comply with a tax authority's legal demand. Without it, you'd face a conflict between your tax obligations (which are legally mandatory) and your confidentiality obligations (which are contractual), and the tax law would win anyway, leaving you vulnerable to a lawsuit from your contract partner.
Insist on this clause—it's non-negotiable because tax compliance is a legal requirement you cannot escape. If the other party resists, explain that you're legally required to cooperate with tax authorities and they cannot contract around that legal duty. You might offer to add language requiring notice to the other party before disclosure, but don't compromise on the core permission. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause allows you to share confidential information with tax authorities like HMRC (in the UK) or the IRS (in the US) when required by tax law.
Why should I care about this clause?
It matters because tax authorities have legal power to demand financial records and information, and you cannot refuse—tax evasion is a crime.
What are my options?
This clause protects you from breach-of-contract liability when you comply with a tax authority's legal demand.
How does this affect small businesses?
Without it, you'd face a conflict between your tax obligations (which are legally mandatory) and your confidentiality obligations (which are contractual), and the tax law would win anyway, leaving you vulnerable to a lawsuit from your contract partner.