Succession Planning

Succession planning

Many owner managers put in a lifetime of hard work building their business only to throw away some of the rewards by failing to consider properly how they will exit from the business.

It is vital to begin planning an exit at an early stage if it is to be a success. Preparing to hand over ownership of a business can be tough, but getting it right is crucial if the business is to remain successful.

Succession planning involves transferring ownership and control of a business to new management. The three main options are:

  • transferring ownership to a family member,
  • transferring ownership to a non-family member
  • disposing of the business through a sale, management buyout, management buy-in or voluntary liquidation.

Transferring ownership can be highly emotional and complicated, which is why often it is ignored until it becomes a pressing issue, for example, when the owner becomes ill or too old to carry on running the business.

Often, business owners are busy dealing with day-to-day issues and consequently end up failing to attach enough importance to planning succession. Leaving succession planning until the last minute is likely to mean effective transferral of ownership is not possible within the necessary time frame. A forced, ill-informed or panic decision could mean the business is transferred into reluctant or unqualified hands, possibly sold at a below par valuation or more than necessary tax liability is created meaning that the seller ends up with less money in their own hands.

The benefits of getting it right

By considering when you are likely to want to exit the business allows time for us to advise on how to prepare the business to be in its best position for sale or handover.

We can advise you on the most tax efficient way to leave. We need to consider your tax position at the earliest possible stage, you may be able to claim business-property relief (BPR) from inheritance tax on shares you give to your relatives. This would allow you to transfer shares, held for at least two years, free of inheritance tax, even if you do not live a further seven years.

You may be able to defer (hold over) Capital Gains Tax, meaning your successor will pay it if and when the gain is released in future. Another option is to put some shares in a trust for your children/grandchildren, from which you are excluded as a beneficiary, which may help to cut your tax bill.

There are many options. Given time and thought we can help you exit your business in the most tax efficient way so that you reap the rewards of your hard work. The earlier you set up an exit plan the sooner you can get on with day to day issues of building and running the business.


If you have any questions or queries on this topic, please feel free to leave a comment or contact us here.

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