When you buy a business in England and Wales, the single most important early decision is how to structure the deal: as an asset purchase or a share purchase. They lead to very different outcomes for liability, tax and employees. Here is a plain-English comparison.
The basic difference
- Share purchase (you buy the shares in the company that owns the business. You acquire the company itself, with everything it owns and owes) known and unknown. The business continues under the same legal entity.
- Asset purchase, you buy selected assets of the business (premises, equipment, stock, goodwill, contracts) and only the liabilities you agree to take. The seller's company, and its baggage, stays behind.
Liability
- Share purchase: the buyer inherits all the company's liabilities, including hidden ones (tax, litigation, claims). This is the main reason share buyers demand strong warranties and indemnities and do thorough due diligence.
- Asset purchase: the buyer largely avoids unwanted liabilities (you choose what to take), but must ensure the assets and key contracts actually transfer (some need assignment/novation and third-party consent).
Employees (TUPE)
- Asset purchase: the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) usually transfer employees automatically to the buyer on their existing terms, with information and consultation duties.
- Share purchase: employees stay employed by the same company, so there is no TUPE transfer (their employer just has new owners).
Tax, a major driver
- Stamp taxes: a share purchase attracts stamp duty at 0.5% on the consideration; an asset purchase may attract SDLT on any land/property (and other rules on specific assets).
- VAT: an asset sale can be VAT-relevant, though it may qualify as a transfer of a going concern (TOGC) (outside the scope of VAT) if conditions are met.
- Seller's reliefs: an individual selling shares may benefit from Business Asset Disposal Relief (BADR) (a reduced capital gains tax rate, subject to conditions); the tax position on an asset sale differs (and a company seller may face a "double tax" charge).
Take tax advice early, the tax outcome often influences which structure each side prefers (sellers often prefer share sales; buyers often prefer asset sales).
Regulatory / change of control
- A change of control of a company (share purchase) can trigger consents under key contracts and, for regulated firms, approval under FSMA; sensitive-sector deals may need clearance under the National Security and Investment Act 2021 (NSIA).
Continuity and complexity
- Share purchase: generally gives seamless continuity (same entity keeps its contracts, licences and history) but more liability risk.
- Asset purchase: cleaner on liabilities, but can be more administratively complex (transferring each asset, contract and consent).
Key takeaways
- Share purchase = buying the company with all its liabilities (seamless continuity, but inherit hidden risks → strong warranties/indemnities needed).
- Asset purchase = buying chosen assets and liabilities (cleaner on liabilities, but transfers can be complex; TUPE moves the staff).
- Tax differs sharply: stamp duty 0.5% (shares) vs SDLT/VAT/TOGC (assets), and BADR for share sellers, get advice early.
- Watch change-of-control consents, FSMA (regulated firms) and NSIA 2021 (sensitive sectors).
Sources
- Companies Act 2006 (shares and transfers); Stamp duty on shares (0.5%); SDLT (Finance Act 2003) and VAT/TOGC rules on assets
- TUPE, Transfer of Undertakings (Protection of Employment) Regulations 2006 (employees on asset sales)
- HMRC Business Asset Disposal Relief; Financial Services and Markets Act 2000 (change of control); National Security and Investment Act 2021
--- This article is general information about the law of England & Wales as at 2026, not legal or tax advice. For advice on your circumstances, consult a qualified solicitor or tax adviser.