When a dental practice owner decides to sell, one of the earliest and most consequential decisions is whether the transaction will proceed as an asset sale or a share sale. The choice affects tax, regulatory timelines, and the likelihood of completing at all. Getting this decision right — before heads of terms are agreed — can be worth hundreds of thousands of pounds.
This guide explains what each structure means in the context of a dental practice, the tax consequences of each, the NHS contract and CQC implications, and the circumstances in which each structure makes most sense.
What Is an Asset Sale?
In an asset sale, the buyer purchases the individual assets of the practice: the goodwill, patient list, equipment, the right to occupy the premises, and — critically — the NHS contract. The corporate entity (if one exists) stays with the seller and is not acquired.
For dental practices, this means:
- NHS contract novation. The existing NHS contract must be formally novated from the seller to the buyer. This requires NHS England (or NHS Wales, NHS Scotland) consent and typically takes four to eight weeks to complete. The novation is almost always a condition precedent on an asset sale — the deal does not complete until the novation is confirmed.
- CQC registration transfer. The Care Quality Commission does not transfer registrations. The buyer must apply for and obtain a fresh CQC registration for the practice location, which takes twelve to twenty-four weeks. This is the critical path in most asset sale transactions.
- Clean liability profile. Because the buyer is acquiring assets rather than a company, pre-completion liabilities remain with the selling entity. The buyer is not inheriting historic employment disputes, unpaid supplier invoices, or latent tax liabilities within the company.
What Is a Share Sale?
In a share sale, the buyer purchases the shares of the limited company that owns and operates the dental practice. The company — and everything in it, including the NHS contract — remains intact. Ownership of the company changes hands.
For dental practices, this means:
- NHS contract continuity. Because the contracting entity does not change, the NHS contract does not need to be novated. A change-of-control clause in the contract may require notification to NHS England, but this is notification rather than consent, and does not hold up completion.
- No new CQC registration. The CQC-registered entity is the company. Because the company is not changing, the existing CQC registration remains in force. There is no twelve-to-twenty-four-week registration timeline to navigate.
- Inherited liabilities. The buyer acquires the company with its full history — tax liabilities, employment contracts, supplier relationships, and any undisclosed contingent liabilities. This liability risk is the main reason buyers frequently prefer asset sales and is typically addressed through warranties and indemnities in the share purchase agreement.
The Tax Difference: An £1 Million Goodwill Example
The tax consequences of the two structures diverge dramatically. For a practice with £1 million of goodwill, the difference in net proceeds to the seller can exceed £440,000.
Asset Sale Tax Treatment
In an asset sale:
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The selling company receives the sale proceeds and pays corporation tax at 25% on the gain (for companies with profits above £250,000). On £1 million of goodwill gain: £250,000 in corporation tax.
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The remaining £750,000 sits inside the company. To get it out, the seller typically takes a dividend. An additional-rate taxpayer pays dividend tax at 39.35% on dividends above the dividend allowance. On £750,000: approximately £295,000 in dividend tax.
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Effective combined rate: approximately 54.5%. Net proceeds to the seller from £1 million of goodwill value: approximately £455,000.
The alternative to immediate dividend extraction is a Members’ Voluntary Liquidation (MVL), which can convert the post-tax proceeds into a capital distribution — potentially attracting CGT rates and BADR eligibility. An MVL adds time and professional cost but can meaningfully reduce the overall tax burden on an asset sale.
Share Sale with BADR
In a share sale where Business Asset Disposal Relief (BADR) applies:
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The seller disposes of their shares. If BADR conditions are met, the gain is taxed at CGT at 10% on the first £1 million of qualifying lifetime gains (the BADR lifetime limit).
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On £1 million of gain: £100,000 in tax.
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Effective rate: 10%. Net proceeds to the seller: £900,000.
The difference on a £1 million goodwill gain: £445,000 in favour of the share sale.
For gains above the £1 million BADR lifetime limit, the excess is taxed at the standard CGT rate (24% for higher-rate taxpayers in 2025/26). Even at 24%, the share sale remains substantially more tax-efficient than an asset sale with corporation tax followed by dividend extraction.
For a full treatment of the tax position, see tax on selling a dental practice.
NHS Contract: The Novation Timeline
The NHS contract is the revenue foundation of most dental practices. How the contract transfers — or does not — is one of the defining differences between the two structures.
Asset Sale: Novation Required
An asset sale requires the existing NHS contract to be novated from the seller to the buyer. This is an administrative process through NHS England (or the devolved equivalent) that typically takes four to eight weeks from the date of application, assuming there are no complications.
The novation is almost universally a condition precedent on the asset sale: the deal does not complete until NHS confirmation of the novation is received. This means:
- If the novation is delayed — by backlogs in NHS processing, queries about the buyer’s credentials, or administrative issues — the completion date moves.
- In commissioning areas where NHS England is managing contract allocation carefully, novation can take longer or, in rare cases, require additional sign-off.
- The seller continues to operate under the contract until novation completes and must meet UDA targets during this period.
Share Sale: No Novation Needed
In a share sale, the contracting entity — the company — does not change. The NHS contract remains held by the same legal entity. There is no novation requirement.
A change-of-control notification may be required under the terms of the specific contract, and this should be reviewed by the seller’s solicitor. But notification to NHS England is distinct from seeking consent: it does not give NHS England a right to veto the transaction or withhold the contract.
In areas where NHS commissioning is uncertain or where NHS England has indicated it will not novate contracts readily, a share sale can be the only structure that preserves the NHS revenue stream for the buyer.
CQC Registration: The Critical Path
The Care Quality Commission (CQC) is the regulator for dental practices in England. A CQC registration is required to operate. How the structure affects CQC is one of the most significant practical differences between asset and share sales.
Asset Sale: New Registration Required
An asset sale requires the buyer to obtain a fresh CQC registration for the practice. The CQC does not transfer registrations between entities.
The timeline for a new CQC registration — from application to confirmation — is typically twelve to twenty-four weeks. During this period:
- The buyer cannot legally operate under their own registration.
- The seller’s CQC registration may be used to bridge the period (subject to the specific arrangements agreed between the parties), but this creates regulatory complexity and risk for the seller.
- The CQC registration process sits on the critical path: it is the most time-consuming regulatory requirement in an asset sale, frequently determining the earliest possible completion date.
For buyers and sellers with firm timeline requirements, the CQC timeline is a significant factor in the viability of an asset sale structure.
Share Sale: Registration Unchanged
In a share sale, the company’s CQC registration remains in place. Because the company — the registered entity — does not change, the CQC registration is unaffected by the change of ownership.
The buyer should notify the CQC of the change of registered manager or change of director/shareholder as required by the CQC’s notifications regime, but this is administrative rather than requiring new registration. The practice can continue to operate without interruption from a CQC perspective.
Buyer and Lender Preferences
Despite the significant tax disadvantage for sellers, asset sales remain the preferred structure for most buyers — and for the lenders who finance acquisitions.
Why buyers prefer asset sales:
- Clean liability profile: the buyer acquires specific assets and does not inherit the selling company’s history of liabilities, tax positions, or employment obligations
- Simpler due diligence: reviewing identified assets is more straightforward than reviewing a company’s full corporate history
- Goodwill step-up: the buyer obtains a fresh cost base for the goodwill, which is deductible against future profits under the intangibles regime
Why lenders prefer asset sales:
- Security is cleaner: lenders can take a charge over specific practice assets without the complexity of securing against a company with a potentially messy balance sheet
- Valuation is more straightforward: the asset being financed is clearly identified
The buyer’s preference for an asset sale is not always negotiable. In competitive sales processes, buyers frequently require an asset sale as a condition of their offer — particularly corporate consolidators with standardised acquisition structures.
When a Share Sale Makes Sense
Despite buyer and lender preferences for asset sales, there are circumstances where a share sale is the right — or only — practical structure.
Tax efficiency. Where the seller has BADR eligibility and the goodwill value is significant, the share sale tax advantage is substantial. A £1 million difference in net proceeds is a strong negotiating argument for a share sale, and many buyers will accept a modest price adjustment in exchange for the structure.
CQC timeline. If the buyer requires a rapid completion — or the seller cannot continue operating for the twelve-to-twenty-four-week CQC registration period — an asset sale may not be viable. A share sale eliminates the CQC critical path entirely.
Slow commissioning area. In areas where NHS England has indicated difficulty novating contracts (due to commissioner intent to consolidate UDAs or retendering), a share sale avoids the novation requirement and preserves the contract.
Restrictive lease. Where the practice premises are held on a lease with a change-of-use or assignment restriction that would prevent the lease being transferred in an asset sale, a share sale — which leaves the lease within the same company — avoids triggering the restriction.
Company structure with clean books. Where the selling company has a clean liability profile (no legacy disputes, fully up-to-date accounts, no undisclosed contingencies) and the buyer’s due diligence confirms this, the buyer’s concern about inherited liabilities is substantially reduced.
Structuring the Decision
The choice between asset sale and share sale is not solely a matter of seller preference. It is a negotiation, and the outcome depends on the specific practice, the buyer, and the transaction dynamics.
Most dental practice sales in the UK proceed as asset sales, reflecting buyer and lender preferences. But for sellers with significant goodwill value and BADR eligibility, the tax case for a share sale is compelling — and the regulatory case is often stronger than buyers initially acknowledge.
The decision must be made before heads of terms are signed. Changing the structure after heads of terms creates friction, and in some cases loses deals. Specialist dental practice solicitors and an accountant with transaction experience should both be involved before any structure is agreed.
For a complete guide to the sale process, see how to sell your dental practice.
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Frequently Asked Questions
Is an asset sale or share sale better for the seller of a dental practice?
For tax purposes, a share sale with BADR is almost always significantly better for the seller — the effective rate can be as low as 10%, against 50–55% combined on an asset sale via corporation tax and dividend extraction. However, buyers and lenders typically prefer asset sales, and the seller may need to accept a price adjustment to secure a share sale structure.
How long does an asset sale take compared to a share sale?
An asset sale takes longer because of the NHS contract novation (four to eight weeks) and the CQC registration requirement (twelve to twenty-four weeks). The CQC registration is the critical path. A share sale avoids both, and can complete significantly faster in practice.
Do I need a new CQC registration when selling my dental practice?
Only if the transaction proceeds as an asset sale. In a share sale, the company’s existing CQC registration remains in force and no new registration is required. In an asset sale, the buyer must obtain a fresh CQC registration for the practice location, which typically takes twelve to twenty-four weeks.
Does an NHS contract transfer automatically in a dental practice sale?
No. In an asset sale, the NHS contract must be formally novated from the seller to the buyer, requiring NHS England consent (typically four to eight weeks). In a share sale, the contracting entity does not change, so no novation is required — though a change-of-control notification may be needed.
What is BADR and how does it affect a dental practice share sale?
Business Asset Disposal Relief (BADR) reduces the capital gains tax rate to 10% on the first £1 million of qualifying lifetime gains where the seller has owned at least 5% of the company’s shares and been an officer or employee for at least two years. On a dental practice share sale, BADR can reduce the effective tax rate from over 50% (asset sale) to 10%, saving hundreds of thousands of pounds on a typical transaction.