Another important consideration when buying a business is tax relief for the plant and machinery of the target company. Where the shares of the target company are acquired, the new owners will inherit the tax written down value in the target company’s capital allowances pool which will normally be a lot lower than the market value of the machinery.
This is another reason why a trade and asset purchase would be preferable for the buyer, as they would acquire the plant and machinery at the agreed market value. Where fixtures and fittings within buildings are acquired it is even possible, by agreement with the vendors, to acquire those items at the original purchase price. Remember that the current Annual Investment Allowance that gives 100% relief on plant and machinery reduces to just £200,000 from 1 January 2016.