Asset Sale vs Share Sale: Which Structure Is Right for Your Dental Practice?

Why the Sale Structure Matters for a Dental Practice

If you are selling or buying a dental practice, one of the first decisions you and your solicitor will make is whether the transaction is structured as an asset sale or a share sale. This choice affects how much tax each party pays, how goodwill transfers, and what liabilities the buyer inherits.

In an asset sale, the seller (whether an individual principal or a company) sells the individual assets of the practice: the goodwill, the dental chairs and equipment, the patient list, the lease, and any other tangible or intangible assets. The buyer acquires these assets directly. The seller's legal entity (the sole trader, partnership, or company) continues to exist, but it no longer operates the dental practice.

In a share sale, the buyer purchases the shares of the company that owns the dental practice. The company itself remains the same legal entity. All assets, liabilities, contracts, and obligations stay with the company. The buyer simply steps into the seller's shoes as the new shareholder.

Each route has different tax consequences, legal risks, and practical implications. This article explains the key differences for UK dentists, using worked examples and the 2025/26 tax rates.

Asset Sale: How It Works for a Dental Practice

What the Buyer Acquires

In an asset sale, the buyer selects which specific assets to purchase. Typically these include:

• Goodwill of the dental practice (the reputation, patient loyalty, and ongoing business value)
• Tangible assets such as dental chairs, X-ray equipment, compressors, autoclaves, computers, and surgery furniture
• The lease of the practice premises (if assignable)
• Patient records and clinical data (subject to GDPR and GDC requirements)
• Stock of dental materials and consumables
• Contracts with associates, hygienists, and suppliers (these often need to be novated or renegotiated)

The buyer does not inherit the seller's historical liabilities, such as past tax debts, employment tribunal claims, or clinical negligence claims (unless they relate to the buyer's own conduct post-sale). This is a major advantage for buyers.

Tax Treatment for the Seller

For a seller who is a sole trader or partnership, an asset sale triggers a capital gain on the disposal of each asset. The gain is the difference between the sale proceeds allocated to that asset and its base cost (usually the original purchase price or market value at acquisition).

Goodwill is treated as a capital asset. The gain on goodwill can qualify for Business Asset Disposal Relief (BADR) if the seller meets the conditions: they must have owned the business for at least two years and be a sole trader, partner, or company officer. For 2025/26, BADR applies a 14% CGT rate on gains up to the £1 million lifetime limit. Gains above £1 million are taxed at the normal CGT rates (18% for basic rate taxpayers, 24% for higher rate).

For a company seller, the asset sale proceeds are received by the company. The company pays corporation tax on any gain (after deducting the base cost and any available reliefs). The company can then distribute the retained profits to shareholders as dividends, which are subject to dividend tax (8.75% basic, 33.75% higher, 39.35% additional) after the £500 dividend allowance.

Tax Treatment for the Buyer

The buyer can claim capital allowances on the tangible assets purchased (dental chairs, X-ray machines, compressors, etc.) under the Annual Investment Allowance (AIA) of up to £1 million per year. This provides 100% tax relief in the year of purchase.

For goodwill acquired after 1 April 2019, the buyer can claim tax relief at 6.5% per year on a straight-line basis (Finance Act 2019). This relief is available only if the goodwill is acquired as part of a trade purchase with eligible intellectual property. Goodwill purchased between 8 July 2015 and 31 March 2019 generally attracts no tax relief.

The buyer cannot claim capital allowances on the practice premises themselves (unless they qualify for Structures and Buildings Allowance at 3% per year on post-29 October 2018 construction or acquisition costs).

Worked Example: Asset Sale of a Dental Practice

Scenario: Dr. Patel, a sole trader, sells her single-handed NHS/private dental practice for £400,000. The purchase price is allocated as follows: goodwill £280,000, equipment £100,000, lease £20,000.

Seller (Dr. Patel):

• Goodwill base cost: £0 (she built it from scratch). Gain: £280,000.
• Equipment base cost: £60,000 (original cost, less any capital allowances claimed). Gain: £40,000.
• Lease base cost: £5,000. Gain: £15,000.
• Total gain: £335,000.
• She claims BADR on the first £1 million of gains. BADR rate 14%. CGT due: £335,000 × 14% = £46,900.
• If she had no BADR (e.g., held for less than two years), CGT would be at 24%: £335,000 × 24% = £80,400.

Buyer (Dr. Khan):

• Claims AIA on equipment: £100,000 × 100% = £100,000 relief in year 1.
• Claims goodwill amortisation: £280,000 × 6.5% = £18,200 per year for 15.4 years.
• Lease: no capital allowances (it is a capital asset, not plant).

Share Sale: How It Works for a Dental Practice

What the Buyer Acquires

In a share sale, the buyer purchases the shares of the company that owns the dental practice. The company retains all its assets, liabilities, contracts, and obligations. The buyer inherits everything: the goodwill (which stays in the company), the equipment, the lease, the patient contracts, the associate agreements, and any historical liabilities (tax, employment, clinical negligence).

This means the buyer takes on the seller's past. If the company has an undisclosed tax liability, a pending employment tribunal, or a clinical negligence claim, the buyer (as the new shareholder) is responsible for it. Due diligence is therefore critical in a share sale.

Tax Treatment for the Seller

The seller of shares in a dental practice company is disposing of a capital asset (the shares). The gain is the difference between the sale proceeds and the base cost of the shares (usually the amount originally subscribed or the market value at acquisition).

Share sale gains can also qualify for BADR if the seller meets the conditions: they must have been an officer or employee of the company for at least two years and hold at least 5% of the shares and voting rights. The same 14% rate applies for 2025/26, with the £1 million lifetime limit.

If the seller does not qualify for BADR (e.g., they hold less than 5% or have used their lifetime limit), the gain is taxed at 18% (basic rate) or 24% (higher rate).

Tax Treatment for the Buyer

The buyer's base cost for the shares is the purchase price. The company's assets (including goodwill) retain their existing tax base costs. The buyer cannot claim capital allowances on the company's existing equipment (unless the company itself acquires new assets post-sale). The buyer also cannot claim goodwill amortisation relief on the company's existing goodwill, because the goodwill was not acquired by the company in the share purchase transaction.

This is a significant disadvantage for buyers. The goodwill that the seller has built up over years remains in the company at its original base cost (often zero). The buyer pays for that goodwill in the share price but gets no tax relief on it.

Worked Example: Share Sale of a Dental Practice

Scenario: Dr. Singh owns 100% of Singh Dental Ltd. He sells all his shares to Dr. Ahmed for £400,000. The company's net asset value (excluding goodwill) is £100,000. The company's goodwill has a base cost of £0.

Seller (Dr. Singh):

• Base cost of shares: £1 (original subscription). Gain: £399,999.
• He qualifies for BADR (held shares for 5 years, 100% ownership). BADR rate 14%.
• CGT due: £399,999 × 14% = £55,999.86.
• Compare to asset sale: he would have paid CGT on the goodwill gain directly, but the overall tax bill is similar if BADR applies.

Buyer (Dr. Ahmed):

• Base cost of shares: £400,000. This is his capital base for future share disposals.
• The company's goodwill remains at £0 base cost. Dr. Ahmed gets no tax relief on the goodwill he effectively paid for.
• He can claim capital allowances on any new equipment the company buys after the sale, but not on the existing equipment.

Key Differences: Asset Sale vs Share Sale for a Dental Practice

Factor	Asset Sale	Share Sale
Buyer inherits historical liabilities	No (unless specifically agreed)	Yes (all liabilities stay with the company)
Goodwill transfer	Separate asset, buyer can claim 6.5% amortisation relief	Goodwill stays in company, buyer gets no relief
Capital allowances on equipment	Buyer can claim AIA on purchased equipment	Buyer cannot claim on existing equipment (only new purchases)
Seller's CGT treatment	Gain on each asset, BADR available if conditions met	Gain on shares, BADR available if conditions met
VAT	May be standard-rated on some assets (equipment, stock) but exempt on goodwill if part of a going concern	Share sale is generally exempt from VAT
Complexity	Higher (asset schedules, lease assignment, contract novation)	Lower (single share transfer, but due diligence is essential)
Speed	Slower (multiple asset transfers)	Faster (one share transfer)

VAT Considerations in a Dental Practice Sale

Dental treatment provided by a registered dental professional is exempt from VAT under VATA 1994 Schedule 9 Group 7. This means the sale of a dental practice as a going concern (including goodwill) is generally treated as an exempt supply for VAT purposes, provided the buyer continues to carry on the same type of business.

However, in an asset sale, the sale of tangible assets such as equipment and stock may be standard-rated for VAT if the seller is VAT-registered. The buyer may need to account for VAT on these items. In a share sale, the transfer of shares is generally exempt from VAT.

If the practice is sold as a transfer of a going concern (TOGC), no VAT is chargeable on the goodwill or the assets, provided certain conditions are met (the business must be transferred as a going concern, the buyer must intend to carry it on, and both parties must be VAT-registered or the buyer must register immediately). TOGC treatment is common in dental practice sales and can simplify the VAT position.

Which Structure Is Better for a Dental Practice Buyer?

For most buyers, an asset sale is preferable. The main reasons are:

• No inherited liabilities: You start with a clean slate. The seller's past tax, employment, and clinical negligence issues stay with them.
• Tax relief on goodwill: You can claim 6.5% annual amortisation relief on the goodwill you pay for, reducing your corporation tax bill over 15+ years.
• Capital allowances: You can claim AIA on the equipment you purchase, giving 100% tax relief in the first year.

However, a share sale may be attractive if the seller insists on it, or if the practice has valuable contracts (such as an NHS contract) that are easier to transfer via a share sale. Some NHS contracts have change-of-control provisions that require approval for an asset sale but not for a share sale. You should check the specific terms of any NHS contract with your solicitor.

Which Structure Is Better for a Dental Practice Seller?

For most sellers, a share sale can be simpler and may offer better CGT treatment, especially if the seller has built up significant goodwill in a company. The seller can claim BADR on the share gain, and the transaction is often faster and less complex.

However, some sellers prefer an asset sale because they can retain the company (if it has other assets or activities) and distribute the sale proceeds as dividends over time, potentially managing their tax liability. This is a more complex strategy and requires careful planning with a dental-specialist accountant.

Practical Steps for Both Parties

Whichever structure you choose, you should take the following steps:

• Engage a dental-specialist solicitor who understands the nuances of practice sales and NHS contract transfer rules.
• Get a professional practice valuation to determine the fair market value of the goodwill and assets. Our practice valuation calculator can give you an initial estimate.
• Conduct financial due diligence on the target practice, especially in a share sale. Our financial due diligence guide covers the key areas to review.
• Agree the allocation of the purchase price in an asset sale. This allocation (how much goes to goodwill, equipment, lease, etc.) affects both parties' tax positions and should be negotiated carefully.
• Check NHS contract terms for any change-of-control or assignment provisions. Some contracts require prior approval from NHS England or the relevant health board.
• Plan for goodwill transfer and ensure the legal documentation reflects the agreed treatment. Our goodwill valuation and sale playbook provides detailed guidance.

Summary: Key Takeaways

• Asset sale: Buyer gets clean title, tax relief on goodwill and equipment. Seller pays CGT on each asset, with BADR available.
• Share sale: Buyer inherits all liabilities, gets no tax relief on goodwill. Seller pays CGT on shares, with BADR available.
• Buyers generally prefer asset sales for the tax advantages and liability protection.
• Sellers may prefer share sales for simplicity and speed, but should consider the tax implications.
• VAT treatment depends on whether the sale qualifies as a TOGC. Most dental practice sales can be structured as TOGC to avoid VAT.
• Always take professional advice from a dental-specialist accountant and solicitor before committing to a structure.

If you are considering buying or selling a dental practice, our team at Dental Finance Partners can help you model the tax consequences of each structure and choose the most tax-efficient route. Contact us for a confidential discussion.