The corporation tax deduction for acquired goodwill and other intangible assets that has been available to companies since April 2002 mentioned above, has meant that companies buying other businesses have generally preferred to buy the trade and assets rather than the shares in the target business. However, the vendors would normally prefer to sell their shares in the company rather than a trade and asset deal, as they would usually pay more tax – corporation tax on the sale of assets, followed by a second tax charge getting the cash out of the company. A share sale would of course mean just 10% CGT, where the shareholder qualifies for entrepreneurs’ relief.
The change in the tax treatment of acquired goodwill for the purchaser will mean that the will be less of a conflict between vendor and purchaser as to how the deal is structured. Where the business being sold has accumulated trading losses the purchasing company may be able to take advantage of those losses, if they buy shares, whereas those losses would lapse where just the assets are acquired.