Business and asset acquisitions—basic tax principles
Business and asset acquisitions—basic tax principles

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Business and asset acquisitions—basic tax principles
  • Tax considerations in an asset purchase
  • Key reliefs for a seller of assets
  • Implications of the asset purchase on the contractual documents
  • Employment tax consequences of a TUPE transfer of employees

In an asset purchase, the buyer purchases only those assets and assumes only those liabilities it wishes to acquire:

  1. sometimes an asset purchase is the purchase of an entire business (ie all the assets that form part of, and are used in, that business) or part of a business, but

  2. sometimes it is just a purchase of an asset or a collection of assets

In this Practice Note:

  1. it is assumed that the parties to a sale are unconnected third parties acting on arm's length terms

  2. CGT means capital gains tax and corporation tax on chargeable gains

  3. TOGC means a transfer of a going concern for VAT purposes

  4. TUPE Regulations 2006 means the Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246

Tax considerations in an asset purchase

The tax consequences of an asset purchase are generally more complex than those that would be triggered by a share purchase (see Practice Note: Share sale or asset sale—tax considerations). This is because an asset sale, particularly a sale of a business, usually involves numerous assets of different types, such as:

  1. premises, ie office buildings or factories

  2. stock in trade, ie assets held on trading account

  3. assets held on capital account

  4. plant or machinery

  5. intangible assets, which broadly includes:

    1. intellectual property (IP), which encompasses a wide variety of intangible property, including (but