Share sale or asset sale?
The difference, the tax consequences on both sides, why buyers and sellers want opposite things, and why this has to be settled before heads of terms.
Tax treatment depends on your circumstances and rates change. Nothing here is tax advice, and the decision between these two routes should not be made without an accountant looking at your specific position.
Two ways to sell the same business, with very different consequences.
In a share sale you sell the shares in the company. The company carries on unchanged, owning everything it owned before, including its history. In an asset sale the company sells its trade and assets, the buyer takes what they want, and you are left holding the company, the cash and whatever nobody wanted.
Why the two sides want different things
The same transaction, viewed from each end of the table.
Why sellers prefer a share sale
It is a clean break. The company goes and its obligations go with it. You are not left running a shell with residual liabilities and an accountant still to pay.
The tax is usually better. A share sale gives you a single capital gain, and Business Asset Disposal Relief may apply to the first £1m of lifetime qualifying gains, at 18 per cent from 6 April 2026 and 14 per cent in the 2025 to 2026 tax year.
An asset sale can tax you twice. The company is taxed on the gain it makes selling its assets, and then you are taxed again getting the money out. That second layer is what makes asset sales expensive for sellers, and it is why the price has to be higher to produce the same net outcome.
Contracts usually stay put. The counterparty does not change, so most agreements continue, subject to any change of control clause.
Why buyers prefer an asset sale
They choose what they buy. The good contracts, the plant, the customer list. Not the dispute from three years ago or the lease on a site they do not want.
They leave the history behind. A company carries everything that ever happened to it: tax positions, employment claims, warranty obligations. Buying assets leaves most of it with you.
The tax works for them. They can often claim deductions against what they have bought, which a share purchase does not give them in the same way.
Diligence is lighter. Less to investigate, so less to worry about and often a faster process.
A buyer pushing for an asset sale? The tax cost has to come back in the price. We will tell you what the number needs to be to leave you in the same place.
Get a free valuationWhat actually changes in practice
Employees transfer either way. TUPE applies on an asset sale, so staff move with the business automatically, with obligations to inform and consult. It is not a way of leaving people behind.
Contracts may need consent. On an asset sale, contracts have to be assigned or novated, which means asking counterparties. Some will use it as an opportunity to renegotiate, and finding out which is part of diligence.
Property is slower. A lease usually needs landlord consent to assign, which takes time and occasionally money.
Licences may not travel. Sector specific approvals, accreditations and registrations often sit with the company. On an asset sale the buyer may have to apply again, which can be the thing that decides the structure.
How it gets negotiated
Most UK owner managed sales end up as share sales, because the seller’s tax position moves the price more than the buyer’s does. A buyer who wants assets has to pay enough more to leave the seller in the same net position, and that premium is often larger than the benefit they were chasing.
But it is negotiated rather than assumed, and it depends on what is being bought. A business whose value is its contracts and people usually sells as shares. One whose value is plant and property, or one carrying a liability nobody wants to inherit, sometimes does not.
The critical point is that this has to be settled in the heads of terms. Agreeing a price and then discovering the buyer assumed assets is a difficult conversation, because the same headline number produces a materially different outcome for you.
Work out the net, not the headline
The only comparison that matters is what reaches your account after tax. An asset sale at a higher headline can leave you worse off than a share sale at a lower one, and the gap can be substantial.
Run both before you agree anything. Your accountant can model it quickly once there is a price to work from.
Answered.
Which is better, a share sale or an asset sale?
For most sellers a share sale, because it is a clean break and it avoids the double tax charge that arises when the company is taxed on the gain and you are taxed again extracting the proceeds. For buyers an asset sale is usually preferable. It is negotiated, and the structure should be settled in heads of terms.
Do employees transfer in an asset sale?
Yes. TUPE applies, so employees transfer automatically with obligations to inform and consult. An asset sale is not a route to leaving staff behind.
Can I get Business Asset Disposal Relief on an asset sale?
The position is different and more restrictive than on a share sale, and it depends on the circumstances, including whether the business is ceasing. This is exactly the point at which an accountant needs to look at your specific facts rather than a general rule.
What happens to my contracts?
On a share sale they usually continue, because the contracting party has not changed, subject to any change of control clause. On an asset sale they have to be assigned or novated, which means asking counterparties for consent and gives some of them an opening to renegotiate.
What would each structure leave you with?
The same price produces very different outcomes depending on the structure. Start with a valuation and work the net figures from there.
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