Comparison of share sale and trade and asset sale

Produced by Tolley

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Comparison of share sale and trade and asset sale
  • Structuring the sale of a business
  • Key differences in tax treatment of business disposals
  • Other useful guidance on business disposals

Comparison of share sale and trade and asset sale

Structuring the sale of a business

A purchasing company can acquire a business in one of two ways, either by purchasing the trade and assets or by purchasing the shares in the company operating the business.

Commercially, purchasers may prefer to buy the trade and assets. This is because they have the ability to negotiate exactly which assets are acquired, and which liabilities are left behind.

Conversely, if the shares in the company are acquired, the company’s entire history is transferred to the new owner, including its liabilities. The due diligence process, which is carried out prior to completion of the acquisition, aims to identify potential liabilities and obligations, and make recommendations to the purchaser as to how to deal with them or mitigate them. This might be by way of price adjustment, underpinned by structure change, or detailed warranty and indemnity provisions in the purchase agreement. A due diligence exercise will not only look at potential tax liabilities, but also covers legal, commercial and financial matters.

On the other hand, the preferred option for vendors is often a share sale. Attractive reliefs may be available, depending upon the circumsta

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