Are you concerned about succession planning and inheritance tax?

Sometimes owners are reluctant to just pass everything on immediately to the next generation.

Passing a business on within the family is often a very effective piece of commercial and tax planning. There are many reasons for this. There are some tax advantages which can be planned in, but it is in other areas that there can be real benefits.

So why consider it at all?

• If they join in with the business then, commercially, the next generation are not tossed about by the job market. Assuming they are competent the potential to enjoy high income is there.
• For the family the return on capital is often much higher if the business is retained within the family as opposed to a one-off disposal.
• Other members of the family can enjoy the fruits of the business. Don’t forget, if other members of the family are not going to be involved think carefully to avoid conflict now or later. We help with relationships as well as just money. Some early planning now can be much cheaper emotionally and financially.
• In tax terms there is no Capital Gains Tax [CGT] on death so at the least that tax can be avoided. Shares, or the Business may be passed earlier than that, with some care of course.
• In Inheritance Tax [IHT] terms if the entity is trading, with no complications, the Owners or their Estate usually enjoy 100% Business Property Relief . If so then there is no IHT chargeable.

Otherwise the inter-relationship between CGT and IHT often have to be considered carefully. Some definitions and rules are similar, some far from it.

Ask us for our detailed IHT Questionnaire. You many find it useful. Interestingly one frequent comment is about the section listing where assets or documentation can be found. Do your nearest and dearest know where all yours can be found?

Increasingly there is an overseas element to Estates and Estate planning. We help with this and have overseas contacts if a specialist is required.

Sometimes owners are reluctant to just pass everything on immediately to the next generation. There are various ways some can be passed on, some not. Some of these are referred to below.

• Although restrictions have been put in place Pension Funds can still sometimes be used in part as a form of quasi IHT planning vehicle.
• Trusts can still be useful, perhaps owning some shares, in some cases even themselves trading!
• The Pre-Owned Assets tax needs to be considered in any Succession planning. This legislation has different rules again. As it is relatively new there are areas of clarification awaited. No doubt over time cases will be brought to court.
• New classes of shares can be issued as part of succession planning. This is a progressively difficult area however, as a result of recent legislation.

Every case really is different. Sometimes innovative suggestions [we are not talking about tax schemes] can help avoid problems or costs.