Structuring a Business Sale: The Tax Questions You Must Answer First

Tax is often the largest single cost in a business sale. Yet tax planning is frequently left too late — after heads of terms have been agreed and the commercial parameters are locked in. Early specialist input can make a material difference.

Share sale versus asset sale

From a seller's perspective, a share sale is generally preferable. Gains on shares in a trading company may qualify for Business Asset Disposal Relief (BADR — formerly Entrepreneurs' Relief), reducing the Capital Gains Tax rate to 10% on the first £1 million of lifetime gains.

From a buyer's perspective, an asset sale is often preferred because the buyer gets a step-up in the tax base of the acquired assets.

Negotiating the deal structure is therefore critical — and there is often a commercial price to pay for one structure over another.

Earn-outs

Where part of the consideration is deferred and contingent on future performance, the tax treatment can be complex. Earn-outs may be subject to Capital Gains Tax or, where the seller remains involved in the business, potentially Income Tax.

Loan notes

Where consideration is deferred via loan notes, the tax treatment depends on whether the notes are qualifying corporate bonds (QCBs) or non-QCBs — with significantly different CGT consequences.

Our role

At Newshams, we work alongside corporate lawyers and accountants to provide specialist tax input at every stage of a transaction — from initial structuring through to completion and beyond. Get in touch to discuss your transaction.