When you sell your company, the difference between a prepared exit and an unprepared one is rarely the headline price. It is the tax.

A shareholder who qualifies for Business Asset Disposal Relief pays 18 per cent on the first £1 million of gain. A shareholder who narrowly fails the conditions pays 24 per cent on all of it.

Nearly every condition that matters is tested over the two years ending with the sale, which means the decisions that fix your tax outcome are made one to two years before the deal, often without anyone noticing that a decision is being made.

IP Tax Solutions prepares owner-managers and their companies for sale, then supports the transaction itself. We are tax only, so we sit beside your corporate finance adviser and your lawyer rather than competing with either, and we put the numbers on the table before the negotiation starts rather than after it ends.

What we do

What decides the tax outcome

The two-year rule. Business Asset Disposal Relief requires its conditions to be met throughout the two years ending with the disposal. A buy-back of a departing shareholder needs five years of ownership for capital treatment. EMI options need two years from grant. So a fix made eighteen months before completion may simply be too late, and a fix made twenty-five months before is in time. By the day heads of terms are signed, the tax outcome of most deals is already history. That is why the exit readiness review exists: it tells you, in writing, what would happen if you sold today and what to change while there is still time to change it.

Share sale or asset sale. When the company sells its assets, the company pays corporation tax on the gains, and the shareholders are taxed again when the proceeds come out. When the shareholders sell their shares, there is one charge, capital gains tax in their hands, with BADR available if the conditions are met. Buyers often prefer to buy assets, because they take less history and more tax deductions with them. The gap between the two routes is quantifiable, and once it is quantified it becomes a negotiating position rather than a surprise. We run both routes with your numbers before anyone commits to a structure.

Business Asset Disposal Relief, properly checked. The personal company test has three limbs: more than 5 per cent of the ordinary share capital, more than 5 per cent of the voting rights, and more than 5 per cent of the distributable profits and assets on a winding up, plus officer or employee status, all throughout the two years ending with the sale. The classic silent failure is non-voting shares. A holder can own a large slice of the company and still fail the voting limb, losing the relief entirely. The fix is simple, a conversion or a small voting parcel, but it only works if it completes at least two years before the sale. Where shares have been spread around a family, each qualifying holder brings their own £1 million lifetime limit, which is one of the strongest reasons to look at the cap table early. Our succession planning work and exit work are two ends of the same exercise.

Earn-outs and deferred consideration. Most deals pay something later: a fixed deferred amount, an earn-out tied to performance, or loan notes. Each is taxed differently. A fixed deferred amount is generally taxed up front at completion even though the cash arrives later. An earn-out whose amount cannot yet be known is itself an asset, valued and taxed at completion, with further computations when the payments actually land. Taking shares or loan notes instead of cash can defer the charge, but deferral can change the rate, because the reliefs are tested when each gain crystallises, not when the deal was done. None of this is exotic. All of it is negotiable, and it belongs in the heads of terms conversation, not the SPA drafts.

Option holders on exit. Properly structured EMI ('exit-only') options are exercised immediately before completion and the shares sold with everyone else's, taxed as capital gains. For EMI shares the 5 per cent tests are disapplied and the two-year BADR clock runs from the grant of the option, so option holders can reach the 18 per cent rate on holdings far below 5 per cent. Options outside EMI are typically taxed as employment income on an exit, usually through payroll. The difference between a clean option exit and a messy one is decided at grant: on one recent exit the holders' treatment was designed into the scheme from the start, so on the day of completion every option was exercised and sold in a single sequence with no repair work and no renegotiation.

An employee ownership trust as the buyer

If there is no obvious trade buyer, or you care more about the company's continuity than the last pound of price, selling a controlling interest (more than half the company) to a trust for all employees is a genuine alternative. Since the November 2025 Budget the capital gains relief covers half the gain rather than all of it, which still produces an effective rate well below a standard sale for most sellers.

The conditions are real: the trustees must be UK resident, the former owners cannot control the trustee board, the valuation must stand up to HMRC scrutiny, and the relief can be clawed back from the seller if the conditions break within four tax years of the sale. The price is usually paid over several years from the company's own profits, so your appetite for deferred payment matters as much as the tax. We run the EOT feasibility numbers alongside the trade sale comparison, not as an afterthought.

Case study

A seller weighing an asset sale against a share sale.
The buyer on a deal worth under £1 million proposed an asset purchase. It suited the buyer. Nobody had yet worked out what it would cost the seller. Before negotiations opened we put the two routes side by side with the seller's actual numbers: the asset route taxed the company on the disposal and then taxed the shareholder again on extracting the proceeds, while the share route produced a single capital gains charge with BADR available.

The difference ran to tens of thousands of pounds on a deal of that size. Armed with the figure, the seller negotiated structure and price together rather than conceding the structure for free, and the deal completed as a share sale. The point is not that share sales always win. Sometimes the asset route is right. The point is that the comparison was done before the negotiation, when it could still change the outcome, rather than after, when it could only measure the damage.

How we can work together

1. Exit readiness review. Cap table, articles, shareholders' agreement, option schemes, latest accounts. The output is a written report: what the tax position would be if you sold today, holder by holder, with a prioritised fix list.
2. The fixes. Restructuring completed early enough to count: conversions, buy-backs, clearances, ERS compliance repairs. Each one diarised against the two-year clock.
3. The deal. Structure comparison with numbers, earn-out and consideration design, clearances, and tax input on the sale documents alongside your corporate finance adviser and lawyers.
4. Completion and after. Exercise-and-sale mechanics executed on the day, then the computations, elections and returns that close the file properly.

FAQ