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Tax position where the vendor is an individual

Typically, an individual vendor would be likely to want to opt for a 'share' deal, as chargeable gains are subject to a lower overall effective rate of tax.

On an asset sale, the overall effective rate, for a higher rate taxpayer, would generally be higher as there will be taxation within the company to take into account. Ignoring reliefs and allowances, on a dividend extraction the tax rate for a higher rate taxpayer will be 50.3% (or up to 46.3% prior to 1 April 2023)¹. On a liquidation the effective tax rate would be 40% (or up to 35.2% prior to 1 April 2023)².

This does not mean, however, that an 'assets' deal should be totally discounted. The vendor company may have significant base cost in the individual assets of Target, or there may be capital or trading losses brought forward which could eliminate the tax charge in the company. Moreover, the vendor may be able to reinvest the disposal proceeds and benefit from rollover