Article

By Nick Wright, Director and Head of Corporate Tax, Jerroms Miller Specialist Tax, part of Sumer Group

‍

The Budget could change the numbers. It shouldn’t change the need to plan.

With the Budget fast approaching, business owners considering a sale, family succession or transfer of their business may be wondering whether they should wait to see what changes are announced.

But effective business succession planning takes time. Waiting for the Budget could limit the options available to you, particularly where changes to tax reliefs or the treatment of business transfers could affect your plans.

The Budget may change the tax landscape, but it shouldn’t be the starting point for your succession planning.

Why does succession planning take time?

Succession planning is about more than deciding who will take over your business. Depending on your circumstances, it may involve reviewing the ownership and share structure, considering how the business could be transferred, obtaining valuations, reviewing available tax reliefs and putting the appropriate arrangements in place, including obtaining HMRC clearances.

For some business owners, succession may mean passing the business to the next generation. For others, it could involve a sale to a third party, a management buyout (MBO) or a sale to an Employee Ownership Trust (EOT).

Each option can have different commercial and tax implications, and the right approach will depend on your individual circumstances and long-term objectives.

This is why succession planning for business owners should ideally begin well before a transaction or transfer is expected to take place.

What areas could the Budget change?

Although the full detail of the Budget will not be known until Budget Day, business owners considering succession should be aware of the tax areas that could affect the sale or transfer of their business.

These could include:

• Capital Gains Tax (CGT) – The tax implications of selling or transferring shares or business assets.
• Business Asset Disposal Relief (BADR) – Where relevant, the relief available on qualifying business disposals.
• Inheritance Tax (IHT) – Particularly where a business is being passed to family members or the next generation.
• Business Property Relief (BPR) – An important consideration when assessing the potential Inheritance Tax position of a business.
• Other measures affecting business transfers – Changes to the wider tax treatment of business ownership and succession could also influence the options available.

For business owners already considering an exit or transfer, understanding the current position can help you assess how potential changes could affect your plans.

What should business owners be considering now?

If succession is on the horizon, now is a good time to step back and consider what you actually want to achieve.

Ask yourself:

Are you considering selling your business?

If a sale is your preferred route, have you considered when you want to exit, who a potential buyer could be and what the tax implications may be?

Do you want to pass the business to family?

Family business succession can require careful planning to balance the needs of the next generation with your own financial and personal objectives.

Could a management or employee buyout work?

A management buyout or a sale to an Employee Ownership Trust may provide an alternative route where there is no family successor or where you want to retain a connection with the business.

Is your current ownership structure suitable?

Your existing share structure may not necessarily be the most appropriate structure for your succession plans. In some circumstances, a share reorganisation, company reconstruction or demerger may need to be considered — and these take time to structure properly, including obtaining any necessary clearances from HMRC.

Have you considered the potential tax implications?

The tax treatment can vary significantly depending on how a business is sold, transferred or reorganised. Understanding the position early can help you make informed decisions.

Do you know what you want your exit to look like?

Succession planning is ultimately about more than tax. Consider when you want to step away, how involved you want to remain and what you want to happen to the business after your exit.

Get ahead of the Budget

If you are considering selling your business, passing it to the next generation or transferring ownership to management or employees, starting the conversation early can give you more time to consider your options.

The earlier you understand your options, the more flexibility you have to respond to any changes announced in the Budget.

At Jerroms Miller Specialist Tax, we work with business owners and their advisers on the technical side of succession — share reorganisations, company reconstructions and demergers, management buyouts, sales to Employee Ownership Trusts, and employment related securities and share schemes.

Thinking about succession? Get in touch and let’s get ahead of the Budget together.

Nick Wright FCA CTA is Director and Head of Corporate Tax at Jerroms Miller Specialist Tax. He advises business owners, accountants and solicitors on company reconstructions, demergers, management buyouts, Employee Ownership Trusts and employee share schemes.

‍