Share Sale or Asset Sale? What TUPE Means

Short answer

In a share sale, the buyer buys the shares of your company, so the company itself carries on with its staff, contracts and certificates, and TUPE does not usually apply because the employer does not change. In an asset sale, the buyer's company buys the business from your company, employees usually transfer under TUPE on their existing terms, and contracts and certificates may need to be moved or replaced. For most owner-managed compliance firms a share sale is simpler, but take advice on which suits you.

1. Share sale

The buyer buys the shares, so you sell the whole company, including its history. Day to day, very little changes: the same company employs your team, holds your customer contracts and keeps its registrations and certificates.

Because the buyer takes on the company's past as well as its future, expect more detailed due diligence, and warranties in the sale agreement, which are statements about the business that the buyer can claim against if they turn out to be untrue.

2. Asset sale

The buyer's company buys selected assets and the business itself, such as contracts, equipment, goodwill and the name, and usually leaves other liabilities behind. The sale proceeds are paid to your company, not to you.

Customer contracts may need to be assigned, which can require each customer's consent.
Registrations and certificates held by your company do not automatically pass to the buyer's company.
An asset sale can be treated as a transfer of a going concern for VAT if HMRC's conditions are met.

3. What TUPE means for your engineers

TUPE protects employees when a business moves from one employer to another. GOV.UK's guidance says the identity of the employer must change for TUPE to apply, which is why it usually applies to asset sales and not share sales. When it applies:

employees' terms and conditions transfer to the new employer;
continuity of employment is maintained;
before the transfer, the employer must inform and consult employee representatives, or a recognised trade union, about the transfer, when and why it is happening, how it will affect staff and any planned changes.

For transfers on or after 1 July 2024, GOV.UK says employers with fewer than 50 employees, or transferring fewer than 10 employees, can consult staff directly if there are no existing representatives. Employers can be penalised if they do not inform and consult. Acas can advise on the detail. Our guide to what happens to your staff when you sell covers pensions, timing and key people.

4. Tax: an outline only

In a share sale you sell your shares and any gain is usually subject to Capital Gains Tax, where Business Asset Disposal Relief may apply if you qualify. GOV.UK sets its rate at 18% for qualifying disposals from 6 April 2026. In the Budget on 28 October 2026, the government announced that the lifetime limit on gains qualifying for the relief will fall from £1 million to £500,000 for disposals on or after 6 April 2027, with special rules for contracts entered into before that date. The 18% rate is unchanged. These changes still have to be passed into law, so ask your accountant how they affect your timing. In an asset sale, the proceeds go to your company, and taking them out as an individual is a second step that can be taxed again. Your accountant should model both before you agree terms.

5. Which is better for you?

For an owner who wants a clean exit and continuity for staff and customers, a share sale is often simpler. An asset sale can suit a buyer that wants only part of a business, or where the company has liabilities a buyer will not take on. Where Richmonds buys a company by share purchase, your team, contracts and certificates stay where they are.

Questions owners ask

Does TUPE apply in a share sale?

Usually not. GOV.UK's guidance says the identity of the employer must change for TUPE to apply, and in a share sale the company that employs your staff stays the same.

Do my employees keep their terms in an asset sale?

Yes. Where TUPE applies, employees' terms and conditions transfer to the new employer and their continuity of employment is maintained.

Which is better for tax, a share sale or an asset sale?

For many owners a share sale is more straightforward, because you receive the proceeds directly and may qualify for Business Asset Disposal Relief. Your accountant should compare both for your circumstances.

Sanjeev Desour is the founder of Richmonds, which buys UK water hygiene, water treatment and fire safety businesses from owners who want to retire. He founded IGNITE Academy in 2014 and runs the IGNITE Group of companies. LinkedIn

Sources

This guide is general information, not legal, tax or financial advice, and it is not an offer to buy any business. It reflects the rules and announcements known on the "last reviewed" date above. Tax rules and rates change, and announced changes may be altered before they become law, so take advice from your own accountant and solicitor before you act. Richmonds accepts no liability for decisions made on the basis of this guide. See our website terms.

Share sale or asset sale, and what TUPE means for your engineers