To avoid an overall tax charge of 29%, as noted above, we would suggest that you sell the shares of your company to the buyer. This will result in a tax charge of 10% of the capital gains and in some cases, if carefully planned; tax charge could be reduced to below 10%. You should note that there are qualifying conditions to benefit from 10% and these are that you should be a director/employee of the company for at least 12 months as well as own more than 5% of shares for at least 12 months also.

If the company has other investments or a large cash balance, then the tax charge could be more than 29%. So, careful planning well in advance of sale will be required.

There will be occasions when the buyer will refuse to buy your company. This is because his or her accountant will try to dissuade their client by pointing out that the buyer will take on all the known and unknown liabilities of the company. We believe that this fear is grossly over-exaggerated and providing the buyer’s accountants and solicitors properly carry out their due diligence work, we see very little risk in the purchaser buying the shares of the company. In any event, it is customary for the buyer’s solicitors to obtain all the warranties and indemnities from the seller for any past liabilities that might arise.

Advantages of a share sale
The seller will be subject to a single tax charge of Capital Gains Tax (CGT).

In the absence of personal guarantees or indemnities, the seller will, on completion, usually be released from any liability to creditors of the company.

Employees will remain employed without the need for consultation.

The need for bank’s consent over a charge on the assets of the company can be avoided.

The buyer does not need to seek a transfer of NHS Contract immediately and this can be done after the sale.
Disadvantages of a share sale
Costs are high for due diligence process, which includes extensive and intrusive inquiries into the company’s affairs. The Share Purchase Agreement runs into some 80 pages and is very daunting.

You will be required to warrant the accuracy of the disclosures, with potential liability in case of defective or inadequate replies to the due diligence questions.

The element of taxation is often a reason why a share sale rather than an asset sale through the company is preferred.