Tax advice on buying a business: shares or assets, due diligence and structure

It depends on what you value most. A share purchase is usually simpler and sellers often prefer it, but the company's tax history comes with it. An asset purchase can leave historic liabilities behind and may give you tax deductions on what you buy, but it can cost more in stamp duty land tax and VAT, and often needs more contracts to be re-signed. We model both.

Yes. The company stays the same legal entity, so any unpaid tax, penalties or errors for past years remain its responsibility, and therefore yours as the new owner. That is why buyers carry out tax due diligence and negotiate tax covenants or indemnities, so the seller pays for problems that relate to the period before completion.

It is a review of the target's tax position before you sign. We look at corporation tax, VAT, payroll taxes, employment status, share schemes, transfer pricing, group reliefs and past HMRC contact. The aim is to find problems that should change the price, be fixed before completion, or be covered by a specific indemnity in the sale agreement.

Stamp duty or stamp duty reserve tax on shares is charged at 0.5% of the consideration, paid by the buyer. For example, a £2m share purchase would carry £10,000 of stamp duty. Where a stock transfer form is used, you pay and send it to HMRC within 30 days of it being signed and dated. Other tax liabilities are separate.

Only if the deal includes land or buildings. In a share purchase no stamp duty land tax is due on the property, because the company still owns it. In an asset purchase it is due on the property itself. For freehold non-residential property in England and Northern Ireland the rates are 0% to £150,000, 2% to £250,000 and 5% above that.

An indemnity is a promise by the seller to compensate you for a specific loss, usually pound for pound, if a particular problem arises. In tax terms it is often used for a known exposure found in due diligence, such as a VAT error or an open HMRC enquiry. It differs from a warranty, which is a statement of fact that you claim on if it proves untrue.

Claim periods for tax warranties and tax covenants commonly run between four and seven years from completion. That reflects the time HMRC has to open enquiries or raise assessments. The period, the financial limits and the conditions for claiming are all negotiable, which is why the tax terms of the agreement need specialist review.

Often, but not always. Interest on borrowing to buy shares can be deductible in the right structure, and relief within a group depends on where the debt sits. Larger groups face the Corporate Interest Restriction, which only applies above £2m of net interest and financing costs in a year. We model the funding structure before you commit to it.

For most acquisitions a new company is the better route. It can keep funding, losses and future sale proceeds in one place, and it keeps the acquisition separate from your personal assets. Buying personally can suit very small deals. We compare the options against your funding, dividend plans and eventual exit before you set anything up.

Yes, and it is a common structure. A holding company can buy the target, receive its dividends largely free of corporation tax, and be the seller on a later exit, where the Substantial Shareholding Exemption may apply. The detail needs planning, including how the holding company is funded and how it affects your own tax position.

It is a VAT term. When assets are sold together as a business that can continue to operate, the sale can be outside the scope of VAT if strict conditions are met, for example about the buyer's VAT registration and the treatment of any land. If the conditions are missed, VAT may be due on the whole price, so we check this before completion.

Possibly, but it needs care. Corporation tax relief for acquired goodwill is restricted in several situations, including some purchases from related parties, and the treatment differs between companies and individuals. Whether you can claim anything on the price paid for goodwill is therefore a point to check early, before the price is agreed.

Yes. Options and employee shares can produce income tax and National Insurance charges on a change of control, and buyers can be left with the payroll reporting. We check what is in place, whether it was set up correctly and how it will be dealt with, and we make sure the sale agreement allocates the cost sensibly.

Share schemes for managers, such as growth shares or Enterprise Management Incentive options, can align the team with your plans, but poorly valued shares can create an income tax charge. We set the terms with tax in mind, including the valuation and, where shares are acquired, whether a joint election within 14 days is wise.

Check the sale agreement first. A tax covenant, indemnity or warranty may let you claim from the seller, but there are notice periods, conduct-of-claims rules and time limits. Speak to us quickly, because the order of events matters. We can help with the claim and with talking to HMRC, including any voluntary disclosure.

Yes, because the structure you choose now affects the tax on your later sale. For example, if you hold the target through a company that qualifies for the Substantial Shareholding Exemption, a later sale may be free of tax in that company. We think about your exit when we design the acquisition.

It is possible, but the cross-border points need advice. These include withholding tax on dividends and interest, residence of the buyer and the structure, tax in the buyer's own country and, if the target is property-rich, special UK rules. We look at both sides and work with your overseas advisers.