Asset Sale vs Share Sale Tax Calculator

Share sale: the buyer purchases the company shares — they acquire the entire company including liabilities. Tax: seller pays CGT on the share gain. Asset sale: the company sells individual business assets — the shell company remains with the seller. Tax: company pays corporation tax on asset gains, then seller extracts proceeds via dividends.

Share sales typically produce lower tax for sellers: CGT at 10% (BADR) or 18–24% (standard) vs. the combined effect of corporation tax on asset gains (up to 25%) plus dividend tax to extract the proceeds (up to 39.35%). Share sales are often significantly more tax-efficient for sellers.

Buyers prefer asset sales because: they avoid inheriting unknown/contingent liabilities of the company, they get a new cost base for acquired assets (enabling capital allowances claims), and they can cherry-pick specific assets they want without assuming the whole entity.

A 'clean' company for share sale purposes has no outstanding liabilities, disputes, or contingent risks. Pre-sale preparation often includes: resolving tax enquiries, eliminating dormant subsidiaries, clearing deferred tax liabilities, and ensuring contracts are assignable.

BADR significantly favours share sales. At 10% CGT vs 25% corporation tax + 39.35% dividend tax, the tax saving of choosing shares over assets can be hundreds of thousands of pounds on a £500,000 sale. This is why professional structuring advice is essential.

Earn-out: part of the sale price is deferred and paid based on future business performance. Typical structure: 70% upfront + 30% over 3 years based on revenue/profit targets. For sellers, earn-out payments are CGT events when received — BADR may still apply.

A mixed consideration deal can be structured — shares in the new entity plus cash for specific assets. This requires careful tax structuring to ensure BADR and other reliefs aren't inadvertently lost. Bespoke tax advice is essential for hybrid structures.

Share purchase due diligence: financial (accounts review, management accounts, cash flow), legal (contracts, IP, property leases), tax (PAYE, VAT, CT returns, outstanding enquiries), commercial (customers, suppliers, staff), and environmental. Typically takes 8–12 weeks.

Warranties are contractual promises about the business's state at completion. Indemnities protect the buyer from specific identified risks. Sellers typically negotiate warranty caps (often 50–100% of sale price) and time limits (typically 18–24 months for standard warranties, 7 years for tax warranties).

In an asset sale, purchased goodwill has a market value — the buyer pays for it as part of the asset purchase price. The company selling its goodwill creates a corporation tax event on the gain above its original cost. If goodwill was self-generated, the original cost is typically £0.

Deferred consideration (future cash payments) is taxable as CGT when received, not at the point of sale. Instalment payments over multiple years spread the CGT liability. However, if BADR applies, it's claimed in the year of sale even if full payment is received later.

Yes — for any sale above £100,000, specialist M&A solicitors and tax advisers typically save multiples of their fees. Tax structuring alone (BADR, pre-sale dividends, earn-out timing) can save tens of thousands. Independent financial advisers may also assist with post-sale wealth planning.