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 make is whether the transaction is an asset sale or a share sale. The choice is not a formality: it decides how much tax each side pays, whether the seller can reach Business Asset Disposal Relief, how the goodwill transfers, and which historical liabilities the buyer inherits.

In an asset sale, the seller sells the individual assets of the practice (goodwill, chairs and equipment, the patient list, the lease and any other assets) and the buyer acquires those assets directly. The seller's legal entity continues to exist but no longer runs the practice. In a share sale, the buyer instead purchases the shares of the company that owns the practice; the company stays the same legal entity and all assets, liabilities, contracts and obligations stay inside it, so the buyer simply steps into the seller's shoes as the new shareholder.

A share sale is only possible if the practice is already incorporated. A sole trader or partnership has no shares to sell, so its only route is an asset sale, unless the practice is incorporated first under section 162 incorporation relief ahead of a later share sale.

Asset Sale: How It Works for a Dental Practice

What the Buyer Acquires

In an asset sale the buyer chooses which specific assets to take. Typically these are:

• Goodwill (the reputation, patient loyalty and ongoing earning power of the practice)
• Tangible assets such as dental chairs, X-ray equipment, compressors, autoclaves, computers and surgery furniture
• The lease of the premises, where it can be assigned
• Patient records and clinical data, subject to GDPR and GDC requirements
• Stock of dental materials and consumables
• Contracts with associates, hygienists and suppliers, which usually have to be novated or renegotiated rather than transferring automatically

The buyer does not inherit the seller's historical liabilities, such as past tax debts, employment claims or pre-sale clinical negligence exposure, unless something is specifically agreed. That clean break is the headline attraction of an asset sale for buyers.

Tax Treatment for the Seller (Unincorporated Practice)

For a sole trader or partnership, an asset sale triggers a capital gain on each chargeable asset. The gain is the proceeds allocated to that asset less its base cost (broadly its original cost or market value at acquisition). Goodwill that the dentist built from scratch often has a base cost of nil, so almost the whole goodwill price is a gain.

The goodwill and other business-asset gains can qualify for Business Asset Disposal Relief (BADR) where the seller has run the business for at least two years before disposal. BADR taxes qualifying gains at 14% for disposals between 6 April 2025 and 5 April 2026, rising to 18% for disposals from 6 April 2026, up to a £1 million lifetime limit per person. Gains above the limit, or that do not qualify, fall to the main CGT rates: 18% within the basic rate band and 24% above it. The annual exempt amount is £3,000. A full breakdown of the relief sits in our guide on what qualifies for Business Asset Disposal Relief, and the wider computation is covered in capital gains tax when selling a dental practice.

One timing point matters here. The capital gain on a practice or goodwill disposal is reported through Self Assessment, not through the 60-day return (the 60-day reporting and payment rule applies to UK residential property disposals only). The 6 April 2026 step from 14% to 18% also makes the date of disposal a live planning lever, which our note on the BADR rate rise and sale timing works through.

The Double-Tax Trap on a Company Asset Sale

This is the single most important point on an asset sale, and the one most often missed. If the practice is owned through a company and the company sells its assets, the tax stacks up in two layers:

• Layer one: the company pays corporation tax on the gain. Corporation tax is 19% on profits up to £50,000, 25% on profits over £250,000, with marginal relief tapering the effective rate between those thresholds (so it is not a flat rate). A large goodwill gain typically lands in the 25% band.
• Layer two: the after-tax proceeds are still sitting inside the company. Getting them out to the dentist personally means either a dividend (taxed at dividend rates) or winding the company up (a further capital gains event on the shares).

Critically, a company-level asset sale gives the shareholder no BADR, because BADR is a relief on a personal disposal of the business or of shares, not on a sale of assets by a company. So an incorporated practice that sells its assets is taxed twice and reaches the reduced rate on neither layer. The route to personal BADR for an incorporated practice is almost always a share sale, which is exactly why incorporated sellers and buyers pull in opposite directions on structure.

Tax Treatment for the Buyer

The buyer can claim capital allowances on the tangible assets purchased (chairs, X-ray machines, compressors and so on). The Annual Investment Allowance gives 100% relief on up to £1 million of qualifying plant and machinery in the period, and most surgery equipment qualifies; anything outside AIA attracts the main-rate writing-down allowance of 18%, reducing to 14% from April 2026, with the special-rate pool unchanged at 6%. The buyer cannot claim plant-and-machinery allowances on the premises, though Structures and Buildings Allowance at 3% per year may apply to qualifying fit-out spend.

For goodwill acquired on or after 1 April 2019, the buyer can claim fixed-rate relief at 6.5% per year on a straight-line basis (an effective 15-year write-down). This relief is not automatic. The goodwill must be acquired as part of a business acquisition that also includes qualifying intellectual property, and the relief is capped at six times the qualifying-IP expenditure. Goodwill acquired between 8 July 2015 and 31 March 2019 generally attracts no relief at all, so a buyer should not assume a flat 6.5% on every deal without checking the qualifying-IP condition and the cap.

Share Sale: How It Works for a Dental Practice

What the Buyer Acquires

In a share sale the buyer buys the shares of the company that owns the practice. The company keeps all its assets, liabilities, contracts and obligations, so the buyer inherits everything: the goodwill (which stays in the company), the equipment, the lease, the patient and associate contracts, and any historical liabilities, whether tax, employment or pre-sale clinical exposure. An undisclosed tax liability, a pending employment claim or a latent negligence issue becomes the new owner's problem. Due diligence is therefore far more searching in a share sale, and the share-purchase agreement leans heavily on warranties and indemnities to push known and unknown risks back onto the seller.

Tax Treatment for the Seller

A share seller disposes of a single capital asset, the shares. The gain is the proceeds less the base cost of the shares (usually what was originally subscribed, often a nominal amount). Because the dentist sells shares personally, the gain can qualify for BADR on the seller's own disposal, and there is only one layer of tax: no corporation tax on a company gain, no second charge to extract the cash.

The share-sale BADR conditions are stricter than the trade-sale conditions. Throughout the two years to disposal the seller must hold at least 5% of the ordinary share capital, 5% of the voting rights and 5% of the economic entitlement, and must be an officer or employee of a trading company. Meet them and qualifying gains are taxed at the BADR rate for the disposal date (14% to 5 April 2026, then 18%) up to the £1 million lifetime limit. Fall outside them and the gain is taxed at the main 18% / 24% CGT rates.

Tax Treatment for the Buyer

The buyer's base cost for the shares is simply what they paid, which becomes their starting point for any future share disposal. The company's underlying assets keep their existing tax base costs. So the buyer cannot claim capital allowances on the company's existing equipment (only on assets the company buys afterwards), and cannot claim 6.5% goodwill relief on the company's existing goodwill, because the company did not acquire that goodwill in the transaction.

This is the buyer's main objection to a share sale. The goodwill the seller spent years building stays in the company at its original base cost, frequently nil. The buyer pays for it in the share price and gets no relief against it, so buyers price that lost relief into their offer, which is where the structure negotiation usually bites. Set against the same company running an asset sale, though, the share route hands the seller a single layer of tax and avoids the corporation-tax-then-extraction double charge entirely, which is why it is usually the preferred exit for an incorporated practice.

Key Differences: Asset Sale vs Share Sale

Factor	Asset Sale	Share Sale
Available to	Any practice (sole trader, partnership or company)	Incorporated practices only (there must be shares to sell)
Buyer inherits historical liabilities	No, unless specifically agreed	Yes, all liabilities stay inside the company
Seller tax layers	One layer if unincorporated; two layers if a company sells its assets (corporation tax, then dividend or winding-up)	One layer (personal CGT on the shares)
Seller access to BADR	Yes for an unincorporated trade sale; none on a company asset sale	Yes, if the 5% / officer-or-employee / 2-year conditions are met
Goodwill relief for buyer	6.5% per year if acquired on/after 1 Apr 2019 with qualifying IP and within the 6x cap	None; goodwill stays in the company at its old base cost
Capital allowances on equipment	Buyer claims AIA on the assets purchased	Buyer cannot claim on existing assets, only on new purchases by the company
NHS contract	Novated to the buyer with commissioner consent	Stays within the company (no novation), subject to change-of-control terms
Other contracts (associates, suppliers, lease)	Each must be novated, assigned or renegotiated	Continue automatically inside the company
Complexity and due diligence	More moving parts (asset schedules, lease assignment, novations)	Single share transfer, but far deeper due diligence and warranties

The NHS Contract: Continuity vs Novation

For a practice with NHS activity, the contract is often the most valuable thing in the deal, and the two structures treat it very differently. In a share sale the legal entity that holds the NHS contract does not change, so the contract continues without a formal transfer, though most contracts contain change-of-control provisions and the commissioner may still review the new ownership. In an asset sale the contract has to be novated to the buyer with commissioner consent, and some commissioners use the sale as a trigger to revisit the per-UDA value. That difference can push an NHS-heavy deal towards a share sale purely to preserve continuity, even where the buyer would otherwise prefer the clean break of an asset sale. There is no single national UDA value, so price the contract on its own per-UDA terms, not on an assumed average. The mechanics, timeline and approval steps are set out in our guide on transferring an NHS dental contract on a practice sale.

VAT in a Dental Practice Sale

The supply of dental care by a registered dental professional is exempt from VAT under VATA 1994 Schedule 9 Group 7, whether NHS-funded or private, so most practice sales raise limited VAT exposure. An asset sale that meets the conditions for a transfer of a going concern (TOGC) is outside the scope of VAT, so no VAT is charged on the goodwill or the assets, the main conditions being that the business transfers as a going concern, the buyer carries on the same kind of business, and the buyer is or immediately becomes VAT-registered where relevant. A share sale is a transfer of shares, itself exempt from VAT. The watch-item is a practice with cosmetic-only work (facial aesthetics or non-therapeutic whitening), which can have standard-rated supplies and a partial-exemption position that complicates an asset sale, so confirm the VAT analysis early rather than assuming it.

Which Structure Suits the Buyer?

Buyers usually lean towards an asset sale, for three reasons:

• No inherited liabilities. The seller's past tax, employment and clinical exposure stays with the seller.
• Relief on goodwill. Where the qualifying-IP condition is met, the buyer can claim 6.5% annual relief on the goodwill acquired.
• Capital allowances. The buyer can claim AIA on the equipment purchased, giving 100% relief on qualifying spend in the period.

A buyer may still accept a share sale where the seller insists on it (to reach their own BADR), or where the NHS contract is easier to keep intact through share continuity than to novate, in which case the buyer leans on thorough due diligence and a robust warranty and indemnity package.

Which Structure Suits the Seller?

For an incorporated practice, a share sale is usually far better for the seller: it is a single personal disposal, it can access BADR, and it avoids the double-tax trap of a company asset sale. An incorporated seller who agrees an asset sale without modelling that double charge can end up materially worse off than expected.

For an unincorporated practice, the only direct route is an asset sale, with BADR available on the qualifying business-asset gains. A principal anticipating a future share sale sometimes incorporates first, using section 162 incorporation relief to defer the gain, then sells the shares once the two-year share-sale clock has run. That is a deliberate strategy that needs the 24-month lead time built in and should be modelled against the NHS-pension consequences of incorporation first.

Practical Steps for Both Parties

• Model the tax of each structure before you negotiate. For an incorporated practice, run the company asset sale (two layers, no BADR) against the share sale (one layer, BADR if conditions are met) so the gap is visible.
• Engage a dental-specialist solicitor who understands practice sales and NHS contract transfer rules, and a dental accountant to model the tax.
• Get a professional practice valuation. Our practice valuation calculator gives an initial estimate of the goodwill and assets.
• Conduct financial due diligence, which is heavier in a share sale because the buyer inherits the company's past. Our financial due diligence guide sets out the key areas.
• Agree the purchase-price allocation in an asset sale. The split between goodwill, equipment and lease affects both sides' tax positions and should be negotiated, not left to chance. Our goodwill valuation and sale playbook covers the detail.
• Check the NHS contract for change-of-control and assignment provisions, and engage the commissioner early.

Summary: Key Takeaways

• Asset sale: the buyer gets a clean slate, relief on qualifying goodwill and capital allowances on equipment, and an unincorporated seller pays a single layer of CGT with BADR available.
• Company asset sale double-tax trap: a company selling its assets pays corporation tax, then a further charge to extract the cash, and the shareholder gets no BADR. For an incorporated practice the route to personal BADR is a share sale.
• Share sale: one layer of tax for the seller, with BADR if the 5% and officer-or-employee conditions are met over two years, but the buyer inherits every liability and gets no goodwill relief.
• Rates to keep current: BADR 14% to 5 April 2026 then 18%, £1m lifetime limit, £3,000 annual exempt amount, main CGT 18% / 24%, corporation tax 19% to 25% with marginal relief, and dividend rates of 10.75% / 35.75% / 39.35% from 6 April 2026.
• Always take professional advice from a dental-specialist accountant and solicitor before fixing the structure.

If you are 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.