Selling your pharmacy
Following our recent blog exploring the key considerations when looking to buy a pharmacy, we now consider the other side of the deal as a potential seller. Whether it is a well-earned retirement or for another reason, preparing your finances and strategy is essential to maximise value and ensure a smooth sale.
Timing is everything
Ideally, the decision to sell should be made at least a year in advance. While life doesn’t always allow for perfect timing, a longer lead-in gives you the opportunity to plan effectively and position your business for sale.
Understanding your value
Before any negotiations start, it is crucial to have a clear understanding of what the business may be worth. Engaging with an accountant or other suitable professional to provide you with a valuation gives you confidence that you are neither leaving value on the table nor asking too much.
The value of a pharmacy can be determined in a variety of ways but it is often a multiple of turnover or profits, with the number of items dispensed and the average item value also having an impact on the valuation.
The Buyer
Once you have an understanding of what the business is worth, you are in a position to open up to offers. Often this will involve marketing by a professional that has a significant presence in the sector, alerting potential buyers to the availability of the pharmacy. Alternatively, you may already have a buyer in mind and can engage in a private sale, saving fees but potentially missing out on a premium.
Legal representation should be sought prior to engaging in any negotiations. Once a deal has been agreed in principle, legal documents will start to flow between the parties. Initially this will be the Heads of Terms (HoT) which will outline the key terms of the proposed transaction.
Due Diligence
Once the HoT have been agreed, the purchaser and their advisors will undertake due diligence  around the financial and legal compliance background of the business. The value of due diligence is ensuring that there are no surprises further down the line that can compromise the deal – in theory any issues are identified early and agreements reached in advance.
From a financial perspective, to prepare for the due diligence exercise you should ensure your management accounts information is up to date. If management accounts are not typically prepared at regular intervals, then year-to-date management accounts will be essential as the buyer will want to review the current profitability and financial position of the pharmacy.
Other items that the buyer is likely to ask for as part of the due diligence exercise can include historical NHS payment schedules (looking back 2-3 years), employment contracts, and lease or ownership details of the building.
The Sale
There are two main methods of selling a business – either selling the company where the buyer enters into a share purchase agreement or selling the assets which would be referred to as an asset purchase.
The buyer’s solicitor will draft a finalised version of the sale agreement often referred to simply as the SPA. This will contain broadly the same terms as the HoT but will include far more detail, protecting both the buyer and seller by clearly defining their respective rights and obligations.
Tax Implications
Tax should not be overlooked when negotiating an exit from your business, poor advice (or none at all) can end up costing thousands.
The taxation of the sale will depend on the method used. In the event of the business being sold via a share purchase agreement, each shareholder will be taxed on their own share of the proceeds, less any allowable costs.
Where the sale takes place via an asset purchase, the gains will be taxable on the selling company in the first instance at the prevailing Corporation Tax rate which will almost certainly be 25%. The funds then need to be extracted from the company and will be taxed on the individuals at that point.
If an unincorporated business is selling via an asset sale, then the gains will be taxed directly on the individuals as is the case for a share purchase agreement.
Business Asset Disposal Relief (BADR) may be available on gains of up to £1m, allowing any gains to be taxed at a lower rate; currently 14% and raising to 18% from 6 April 2026. There are certain qualifying conditions that need to be met to enable a BADR claim – your accountant will be able to ascertain whether the conditions are met.
The easiest way to illustrate how the tax treatment can differ is to work through an example.
Mrs Smith is approaching her planned retirement age and wants to sell her pharmacy to spend more time with her husband and grandkids. She has received an offer of £1.25m to purchase her pharmacy that currently trades as a Limited Company. She is unsure whether to sell her shares or sell the assets of the company.
| Sale of shares (£) | Asset sale (£) | |
| Proceeds | 1,250,000 | 1,250,000 |
| Less Allowable costs | (20,000) | (20,000) |
| Gain | 1,230,000 | 1,230,000 |
| Corporation tax | – | (307,500) |
| Net position | 1,230,000 | 922,500 |
| Annual CGT Exempt Amount | (3,000) | (3,000) |
| Taxable gains | 1,227,000 | 919,500 |
| BADR at 18% (up to £1m) | (180,000) | (165,510) |
| Remaining balance at 24% | (54,480) | – |
| Cash in hand | 992,520 | 753,990 |
- Sale assumed to be completed after 6 April 2026.
- Allowable costs deemed to be legal costs in relation to selling. Cost of original shares assumed negligible and ignored for purpose of calculation.
- The asset sale is a simplified calculation assuming all proceeds relate to goodwill.
The above example favours a sale of shares for Mrs Smith but this will not be the same for every sale scenario therefore tailored advice is crucial.
Conclusion
Selling a pharmacy is a complex process that requires careful planning and professional advice. By understanding the key steps and seeking guidance from experienced professionals, you can navigate the process with confidence and achieve a successful outcome.
Lewis Hunter CA, CTA
Lewis is an Accounts Manager with experience in the preparation of annual accounts, corporation and personal tax. He manages a portfolio of owner-managed businesses.