PROSPER MAGAZINE: DIGITAL EDITION
CRUCIAL TIME FOR EXIT AND SUCCESSION PLANNING
Susheel Gupta, Head of Business Tax and Wealth Preservation at leading law firm Higgs & Sons, explains how owners of businesses can use the delay in the Budget to accelerate their exit and succession planning.
Effective tax planning will never be far from the minds of business owners but, now more than ever, it should be at the very top of the priority list.
The decision of Chancellor Rishi Sunak to delay the Budget from this Autumn – quite possibly until next March – has provided a small but vital window of opportunity for business owners to act to secure the current low Capital Gains Tax rates, be it from transferring shares to other family members as part of their succession plans or even disposal to a third party.
Since the delay to the Budget was confirmed, we have seen a marked increase in enquiries from owners seeking to make swift but effective long-term decisions over the future of their businesses.
At present, we are working on a host of different tax planning projects and I would only expect that number to increase over the coming weeks while the landscape for Capital Gains Tax, Inheritance Tax and other taxes and exemptions on estates remains favourable.
Given the enormous rise in public spending around coronavirus since March, it is inevitable that tax rises will be on the way in the near future and the categories of tax listed above are under scrutiny by the Treasury.
Our entire Business Tax and Wealth Preservation Team at Higgs & Sons have been busy working closely with a range of clients, accountants and financial – as well as other professional - advisors to provide the best possible solutions at the current tax levels.
It’s not just business owners thinking of retirement who are making enquiries – it’s owners of all ages acting at a time when tax rates are at a level that we might not see again for quite some time.
The key message when it comes to exit and succession planning is to act now.
The process can take anything up to three months to implement and receive HMRC clearance so, while the pressure valve has been released slightly by the delay in the Budget, it’s not the time for business owners to sit on their hands.
Examples of how amending exit or succession planning strategies now can be beneficial centre around Capital Gains Tax and Inheritance Tax planning.
Capital Gains Tax rates in trading companies currently sit at 10 and 20 per cent, not only representing a historically low level but also showing a huge disparity when compared with the levels of income tax. This is a gap which the Chancellor may well look to bridge in some form in his next financial statement.
There are also suggestions that the Capital Gains Tax uplift in value on shares in a trading company upon death may be removed, or the key Inheritance Tax exemption of Business Property Relief may be altered going forward.
With that in mind, it is a vital time for business owners to consider what the future holds for them and their businesses in the medium to long term.
It may well mean bringing forward their plans to transfer shares to either family members, into trusts, to management or even to look to a third-party exit.
When it comes to exit and succession planning, there is no one-size-fits-all approach and securing the best bespoke solution possible will depend on the circumstances of each individual or business.
While we fully appreciate any tax, the solution has to fit the business owner’s commercial objectives, now really is the time to stop, pause and see what options may be available to you.
If you are a business owner and considering your potential exit or succession planning options, please contact me at or on 07912 121 804.