Tax is often one of the more complex aspects of a transaction and one of the most important. The consequences for both the company and the shareholders vary widely depending on:
- Deal structure
- Types of consideration
- Seller’s personal tax profile
- Timing
- Future plans
Early advice is essential because the deal structure contained within the Share Purchase Agreement (“SPA”) will lock in the tax outcomes.
Shareholder tax advice
Different elements of consideration are taxed differently – cash, shares, deferred payments, loan notes, earnouts – and can materially affect the seller’s final Capital Gains Tax (“CGT”) position.
Future plans can also influence tax advice. For example, moving overseas or planning to gift assets to the next generation may trigger tax issues or create opportunities.
Beyond CGT, sellers must consider Inheritance Tax (“IHT”). A trading business may qualify for Business Property Relief (BPR), offering up to £2.5m of relief from 5 April 2026. However, once the business is sold, cash proceeds lose this protection and fall fully back within the estate.
PEM’s Private Client team can help identify planning opportunities, before or after the transaction, to manage both CGT and IHT exposure.
Company Tax Advice
Pre‑deal planning often includes questions such as:
- Should surplus cash or property be extracted before the sale?
- Is the buyer expecting certain assets to remain in the business?
- Are there unexercised share options (EMI or otherwise) that could affect the deal?
These issues can materially impact negotiations and involve employees who may not have been aware of the sale. Clear communication and specialist advice are essential.
There may also be opportunities for the business and therefore the shareholders to benefit, such as obtaining a corporation tax deduction when EMI options are exercised.
Tax treatments can significantly affect the overall value you receive and the timing of tax payments. Sellers should consider their tax position from the earliest stage of the deal.
Final Thoughts
A business sale is a journey that unfolds in stages—from Heads of Terms to Due Diligence, to tax planning and negotiations. Each step carries its own risks and opportunities. Getting the fundamentals right early, with the right advisers alongside you, can make the difference between a smooth, successful transaction and a stressful, unpredictable one.
How PEM can help
The PEM corporate finance, tax and private client specialists work collaboratively to guide business owners through each stage of the process – protecting value, reducing risk and helping you achieve the best possible outcome.
