When a limited company’s business changes hands, there are two ways to do it. The buyer can buy the business and assets from the company, or buy the shares in the company from its shareholders. The commercial result can look the same, but the legal and tax consequences are very different, and buyers and sellers often want opposite things. This guide sets out the advantages and disadvantages of each route for both sides, so you can go into negotiations knowing where the pressure points are.
In brief
- In an asset sale the company sells chosen assets and keeps everything else. In a share sale the company itself changes owners, with all its history.
- Sellers usually prefer a share sale: one layer of tax, a cleaner exit and possible Business Asset Disposal Relief at 18%.
- Buyers often prefer an asset sale: they choose what to take on and leave unknown liabilities behind.
- Employees transfer under TUPE on an asset sale; on a share sale their employer does not change.
- A share purchase carries 0.5% stamp duty; an asset purchase may carry LBTT on property and possibly VAT.
The basic difference
In an asset sale, the seller is the company. It sells some or all of the assets used in its business, such as goodwill, equipment, stock, intellectual property, contracts and premises, and the buyer agrees which liabilities, if any, it will take on. The company, with its remaining assets and liabilities, stays with the original owners.
In a share sale, the sellers are the shareholders. The buyer acquires their shares, and the company carries on exactly as before, owning all its assets and owing all its liabilities, known and unknown. The buyer’s protection comes from due diligence and the warranties and indemnities in the share purchase agreement. Our guide to buying or selling a business in Scotland explains how both types of deal run from start to finish.
The seller’s view
| Asset sale | Share sale | |
|---|---|---|
| Tax | Company pays Corporation Tax on gains, then shareholders pay tax again when they extract the proceeds | Shareholders pay Capital Gains Tax once, possibly with Business Asset Disposal Relief |
| Clean break | Company is left behind and must settle its liabilities and usually be wound up | Sellers walk away from the company entirely |
| Liabilities | Unwanted liabilities generally stay with the selling company | Liabilities go with the company, so the buyer will want wide warranties and indemnities |
| Flexibility | Can keep some assets, such as property, or sell parts of the business separately | All or nothing: the whole company is sold |
| Complexity | Each asset, contract and licence must be transferred individually | Usually simpler to transfer, although negotiations can be longer |
For most owner-managers, the decisive factor is tax. A share sale produces a single tax charge on the shareholders, whereas an asset sale can produce two: Corporation Tax on the company’s gain and then income tax or Capital Gains Tax when the shareholders take the money out. If the business owns valuable property or other assets that the seller wants to keep, though, an asset sale may still be the better fit.
The buyer’s view
| Asset purchase | Share purchase | |
|---|---|---|
| Risk | Takes only the assets and liabilities it agrees to | Takes the company’s full history, including unknown claims and tax issues |
| Due diligence | Focused on the assets being bought | Wider and deeper, covering the whole company |
| Tax on purchase | LBTT on any property and possibly VAT, unless the sale is a transfer of a going concern | Stamp duty of 0.5% on the price |
| Tax position afterwards | May get tax relief on some purchased assets, such as capital allowances on plant and machinery | No change to the tax value of the company’s assets |
| Continuity | Contracts, leases and licences may need consent to transfer | Contracts and licences stay with the company, subject to change of control clauses |
Buyers of businesses with a short track record, unclear records or potential claims often insist on an asset purchase. Where key contracts, licences or accreditations cannot easily be transferred, a share purchase may be the only practical option, with the risk managed through due diligence, warranties, indemnities and sometimes retention of part of the price.
Tax compared
- Individual sellers of shares pay Capital Gains Tax at 18% or 24%. Business Asset Disposal Relief can reduce the rate to 18% on up to £1 million of lifetime gains, provided the conditions have been met for two years, including holding at least 5% of the shares and being an officer or employee of a trading company.
- Corporate sellers of shares may be exempt from tax on the gain under the substantial shareholding exemption, where they have held at least 10% of a trading company for 12 months.
- Companies selling assets pay Corporation Tax on chargeable gains. Shareholders then face a second charge when they extract the proceeds, as a dividend or as a capital distribution on winding up, where anti-avoidance rules may apply.
- Stamp taxes. A share purchase attracts stamp duty at 0.5%. An asset purchase that includes property in Scotland attracts Land and Buildings Transaction Tax instead.
- VAT. Share sales are exempt. Asset sales can be standard rated unless they qualify as a transfer of a going concern, which depends on the buyer carrying on the same kind of business.
Tax rules change frequently and the figures above are for the 2026 to 2027 tax year. Both sides should take tax advice before heads of terms are agreed, because the structure is very hard to change once the deal is under way.
Employees, contracts and property
Employees
On an asset sale, employees assigned to the business usually transfer to the buyer automatically under TUPE, on their existing terms and with their continuous service, and both sides have information and consultation duties. On a share sale there is no TUPE transfer, because the employer remains the same company.
Contracts
In Scotland, contracts are transferred by assignation, and many key customer and supplier contracts cannot be assigned without the other party’s consent. On a share sale they stay in place automatically, but change of control clauses may give the other party a right to terminate or renegotiate.
Property
If the business owns its premises, an asset sale needs a disposition and LBTT. If it leases them, the landlord’s consent is usually needed to assign the lease, and the seller may be asked to guarantee the buyer. Our commercial lease team deals with landlords’ consents as part of the transaction.
How the choice is usually made
In practice, the structure is agreed early, at heads of terms, and is a matter of negotiation. A seller who insists on a share sale may have to accept a lower price or wider warranties, while a buyer who insists on an asset sale may have to pay more to compensate for the seller’s extra tax. Where the buyers are the existing managers, a management buyout is usually structured as a share purchase by a new company. Sellers can make either route smoother by preparing well, as explained in our guide to preparing your business for sale.
Frequently asked questions
Can a sole trader or partnership sell shares?
No. A sole trader or partnership has no shares, so the business must be sold by way of an asset sale. A company is the only structure that gives the share sale option.
Why would a seller agree to an asset sale?
Usually because the buyer insists on it, because the seller wants to keep certain assets such as property, or because only part of the business is being sold. Sometimes a business is first transferred into a new company and the shares in that company are then sold.
Does a share sale avoid LBTT on the company’s property?
Yes. Because the property stays owned by the company, no LBTT is due on a share purchase, although stamp duty is payable on the shares.
Do warranties matter less on an asset purchase?
They still matter, but they usually focus on the assets being bought. On a share purchase the buyer inherits the company’s whole history, so the warranties and a tax indemnity are much more extensive.
Can I buy a business from an administrator?
Yes. Purchases from administrators and liquidators are almost always asset purchases, with very limited warranties. Our insolvency team can advise on these deals.
Deciding how to structure a sale or purchase?
Our business solicitors act for buyers and sellers across Scotland on both asset and share deals, working with your accountant on the tax. Call 0141 471 9166 or book a free consultation.
Related services and guides
This guide reflects Scots law and UK tax rules as at October 2026. It is general information rather than legal or tax advice on your transaction, so please speak to us and your accountant before deciding on a structure.