Many business owners wish to protect and preserve their business for the next generation.
Many factors impact on an overall succession plan:

• Whether the owner is prepared to let go;

• Whether successors have been identified and ready to take over;

• Whether future management will be family or non-family members;

• How ownership will be transferred;

• Whether adequate financial provision has been made for the owner in retirement;

• How the wider family will react to any decision made.

In addition, tax is likely to be an issue you will hear a lot about over the next few months. Currently, businesses can transition with the benefit of advantageous reliefs for capital gains tax and capital acquisitions tax.

We believe that, given the important contribution of domestic businesses to the overall economy, we would expect little change to the various reliefs for business assets being gifted or inherited. However, the overall capital tax rates may increase, which, even with the benefit of reliefs, would result in some level of additional tax arising.

As a result, the most tax efficient time to transfer your business would appear to be within the next three months. Thereafter the potential for higher taxes on a business transfer is a possibility.

You may feel inclined to act earlier than you previously would have wished due to potential higher tax costs in transitioning the business in the future. However, a rushed, badly thought out transition of the business solely for tax reasons is not likely to be successful in the long term. Consider some of the following:

• Would you have transferred the business to family members in any event in the next number of years? If so, then it may be appropriate to accelerate that decision.

• Have you given much thought to this, or are you solely thinking about it now for tax reasons?

• Where transitioning the business to family members, how long have they been involved in the business? Have they the appropriate experience and qualifications to run the business?

• Where there is a difference in the age of your children, have you considered whether younger family members would wish to get involved in the business in the future? If so, transitioning the entire business now to older children may not be appropriate.

• Have you considered your financial position in retirement and will you be reliant on the business to fund some or part of your retirement needs? If so, any potential transfer of the business now should factor in what economic entitlements/rights will be reserved in your favour.

• Through adequate structuring, it may be possible to retain substantial control over your business while passing a significant portion of the value to your family now.

• If you are uncertain, but still wish to take some action, a transfer of a part interest in the business could be implemented.

Business owners will approach this matter in many different ways. Above all else, do what is right for the business, not something that is purely driven for tax reasons.