Trade and asset sales: tax implications - part 1

17 Jul 2019

Croner-i tax writer Paul Davies FCA CTA unpicks the tax implications of trade and asset sales by a company to an unconnected third party looking at how every component of the sale can have an impact on tax efficiency

This is a beginner’s guide to the tax consequences of trade and asset sales by a company to an unconnected third party, but will not cover connected person situations, such as the disincorporation of a company.

A trade and asset sale generally involves:

the sale by a company, and the acquisition by a purchaser, of some or all of the company’s individual assets, liabilities and business undertakings;
the receipt by the company of the purchase consideration for each of the individual assets, liabilities and business undertakings transferred to the purchaser; and
no change in the ownership interests of the company’s shareholders unless the asset sale is followed by a winding-up of the company in order to pass the proceeds of sale from the company to its shareholders.

Sale of trade and assets or sale of shares

An asset sale may be part of an arrangement to realise the value of an owner’s shareholding in a company. In that case it can be viewed as an alternative to a sale by the company’s shareholders of their shareholdings in the company.

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